Nick Train, Giles Hargreave and Martin Cholwill are among a handful of fund managers who, over the past ten years, have managed to keep their funds out of the bottom quartile every individual year, while achieving top-quartile returns over the whole time frame in question.
The research, carried out by Investment Week using FE data, comes shortly after a markedly volatile year for markets.
Geopolitical and macroeconomic uncertainty rocked equity markets in 2018, leading to a sharp Q4 sell-off.
Meanwhile, 10-year US Treasury yields crept up throughout the year, surpassing the psychologically important 3% mark, only to once again fall at the end of 2018 as investors flocked to safety.
Such an environment can make it challenging for active managers, but it can also present an opportunity to buy during the dips. FE data shows that, over 2018, only 95 out of 301 funds (or 31.6%) in the IA Global sector managed to outperform the MSCI AC World index.
On the other hand, the rallying equity markets of 2017, while welcomed by those who closely follow an index, made it difficult for some active managers to outperform on a relative basis – particularly those who are contrarian or adopt a value approach.
Again, FE data shows that just over half of IA Global fund managers (or 146 out of 282 funds) managed to beat the MSCI AC World over the course of the year.
As such, and given that certain investing styles will fall in and out of fashion over the varying stages of the market cycle, it is no mean feat to consistently stay out of the bottom quartile for total returns year after year.
However, it is arguably these types of managers that investors will be keener than ever to find, given many analysts expect “more of the same” when it comes to market volatility this year.
Investment Week singled out the funds in the Investment Association universe that have had the same managers at their helms for at least ten years to the end of 2018, and that have achieved top-quartile returns relative to their average peer groups over this time frame.
Investment Week then excluded all funds from the list that have fallen into the bottom quartile once or more during any of the last ten years.
To ensure the study was fair, the likes of the IA Flexible and IA Targeted Absolute Return sectors were excluded, given the performance of funds within these sectors cannot be directly compared to an average.
In total, 27 managers and four companies running 23 funds between them managed to pass Investment Week’s filters.
These funds spanned 15 sectors, with the IA Global Bond and IA North America sectors housing the most outperforming vehicles that have been run by the same manager over the last decade at three funds each.
In the IA North America sector, however, two out of three funds track an index – the FTSE USA – which is up 287.55% over ten years to the end of 2018.
The only other US fund on the list is Vanguard US Opportunities, an active fund which aims to pick stocks that are attractively priced and can outperform the broader market over three to five years. It mostly invests in small- and mid-cap companies.
The other sector to house three consistently strong long-term managers, according to Investment Week’s filters, is the aforementioned IA Global Bonds sector.
These include Capital Group Global High Income Opportunities, which has been run by Robert Neithart since 2002 (who was joined by David Daigle in 2012); Natixis Loomis Sayles Multi Sector Income, which has been run by co-manager Dan Fuss since 1997 and fellow co-managers Elaine Stokes and Matthew Eagan since 2007; and Marlborough Global Bond, which Geoff Hitchin and Nicholas Cooling have headed up since 1987 and 1998 respectively.
Meanwhile, all three UK equity sectors held two outperforming funds each. Nick Train and the company he co-owns, Lindsell Train Investments, are the only two managers to make the cut for the IA UK All Companies sector.
This is for the LF Lindsell Train UK Equity and Aviva Investors UK Equity MoM 1 funds respectively. The latter has been managed by Train’s company since 2008, while the former was launched by the manager himself in 2006.
In the IA UK Equity Income sector, there are Lazard Multicap UK Income, which has been managed by Alan Clifford and Alan Custis since the start of 2008 and 2009 respectively, and Royal London UK Equity Income, which has been headed up by Martin Cholwill since 2005.
Finally, the two managers to make it onto our list in the IA UK Smaller Companies sector are Giles Hargreave and Neil Hermon.
Hargreave heads up the top-performing Marlborough UK Micro Cap Growth fund, which he has co-managed alongside Guy Feld since 2012, while Hermon has run the Janus Henderson UK Smaller Companies fund since 2002.
The only other sector to house two consistently outperforming long-term managers, according to filters, is the IA Sterling Strategic Bond sector.
Ariel Bezalel, has run the Jupiter Strategic Bond fund since 2008, and Eric Holt, has managed the Royal London Sterling Extra Yield Bond fund since 2003.
This is reproduced from Investment Week; all views are from the publication. This originally appeared online on 04 April 2019.