BlackRock European Dynamic is the equity fund that has achieved the most consistently impressive track record over successive three-year periods, according to FE Trustnet research.
Funds run by Lindsell Train, Stewart Investors and Baillie Gifford are also among those that have managed to stay at the top of their peer group from one three-year period to the next.
This follows our recent article looking into the proportion of equity funds in the Investment Association universe that have been able to maintain first-quartile performance over successive three-year period.
Our research found that 35.1 per cent of funds were able to sit in the top quartile over two successive periods while 12.6 per cent did this over three periods in a row.
Performance of fund vs sector and index under Hibbert
Source: FE Analytics
When we looked at how individual funds within the 10 main equity sectors have held up, there was a clear winner. FE Alpha Manager Alister Hibbert’s £3bn BlackRock European Dynamic fund has 13 three-year periods that we examined in this research and it is first quartile in each of them.
The five FE Crown-rated fund attempts to exploit market inefficiencies through detailed company fundamental research, an awareness of macro themes and use of sophisticated risk management tools.
Square Mile Investment Consulting & Research, which gives the fund its top ‘AAA’ rating, said: “The fund aims to outperform in a range of market conditions a challenging objective for any manager to achieve and which may not be realisable in the short run.
“Nonetheless, we think highly of Mr Hibbert, who we believe to be a skilled investor. His temperament is suited to the demands of this mandate and his lengthy experience of investing through different market conditions gives him the edge one needs to run this type of strategy.”
Excluding those with a track record of less than 10 years, only one other equity fund has achieved top-quartile performance in every three-year period: LF Lindsell Train UK Equity, which is headed up by FE Alpha Manager Nick Train, has done this in all of its nine periods of track record.
This another fund that has an impressive long-term track record (it’s made more than 300 per cent since launch in July 2006, more than double its average IA UK All Companies peer) and has won the respect of fund analysts.
The FE Invest team, which has the fund on its Approved List, said: “Achieving this impressive performance track-record with the low portfolio turnover highlights his stock picking skills. We like the consistency of his strategy, which will not vary depending on the economic conditions.”
Source: FE Analytics
The above table shows the funds with a track record of more than 10 years and top-quartile performance in at least 70 per cent of rolling three-year periods.
It is not too surprising to see that mid-cap funds have established a strong showing of outperformance in the IA UK All Companies sector, given the potential for higher returns in this part of the market.
Old Mutual UK Mid Cap, Threadneedle UK Mid 250 and Royal London UK Mid-Cap Growth all appear near the top of the table in this research while an index tracker - HSBC FTSE 250 Index – is ranked highly.
Other notable funds include Liontrust Special Situations, which is run by the FE Alpha Manager duo of Anthony Cross and Julian Fosh. This £3.6bn portfolio has a bias towards small- and mid-caps, helping to explain its strong relative performance; it also uses Liontrust’s Economic Advantage investment process, which focuses on companies with intangible assets such as desirable intellectual property, strong distribution channels and significant recurring business.
The largest fund on the above table is Morgan Stanley Global Brands, which has assets under management of £7.5bn. It has FE Alpha Manager William Lock as its lead manager with Bruno Paulson, Christian Derold, Vladimir Demine and Marcus Watson.
This fund focuses on high-quality companies that have dominant market positions and hard to replicate intangible assets combined with high, unlevered returns on operating capital and strong free cash flows. Companies such as this have enjoyed a strong run in the post-crisis bull market, meaning the fund has been in the IA Global sector’s top-quartile over 73 per cent of the 15 three-year periods it has a track record for.
Performance of fund vs sector and index since launch
Source: FE Analytics
Of course, not every fund will be able to spend the bulk of its track record in the top quartile of its sector. The £570.1m Pictet Clean Energy fund holds bottom place in this research as it is in the IA Global sector’s bottom quartile for all eight rolling three-year periods of its history.
Other funds that have spent the largest proportion of their track record in the bottom quartile over rolling three years include Halifax Special Situations (92 per cent), F&C Global Thematic Opportunities (79 per cent), Legg Mason ClearBridge Global Equity (78 per cent), Aberdeen Global North American Equity (78 per cent) and Neptune Global Smaller Companies (75 per cent) - although the latter fund's track record was established prior to a change in name and objective, when it was called Neptune Global Special Situations.