17 min Read
11 Oct 2016

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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The best performing funds to invest in right now

The best performing funds to invest in right now

Finding the best performing funds to invest in right now

In this article I highlight the best performing funds over 10 years and 5 years. I also highlight the best investment fund managers in the UK. Yet you shouldn’t just focus on past performance over 5 or 10 years alone.

As one of the most frequently quoted investment experts in the UK national press, including The Times and The Telegraph, I will show you how to pick the best performing funds to invest now. That is very different from simply opting for the best performing funds over the last 5 or 10 years.

In fact I would invest in hardly any of the top performing funds over the last 5 or 10 years and neither should you

Funds are inconsistent and you should invest in funds that suit the current economic and investment environment. I will show you how I successfully identify the funds with an increased chance of performing well going forward.

Best performing investment funds to invest in

The tables below show the best performing funds over 5 years and 10 years. All these funds can be held in a Stocks and Shares ISA or a Self Invested Personal Pension (SIPP). The percentage return shown is the total return figures which assumes all income and dividends are reinvested. The funds are grouped by fund sector so you can see the best performing funds for the most popular fund sectors. We have shown the top decile performers, rather than the top 10 investment funds, for each sector because each sector contains a different number of funds.

While the funds below would have been the best funds to invest in over the last 10 years and 5 years,  within their respective sectors, there is no evidence that they will continue to perform well as I show later. In fact taking such a long term view masks long periods of underperformance. I elaborate on this below in the section titled How to pick the best performing funds to invest in now.

The top performing funds over 10 years

Asia Pacific Excluding Japan

Name 10 year fund performance %
Stewart Investors - Asia Pacific 297.25
Fidelity - Asia W 248.99
Newton - Asian Income B Acc GBP 225.6
Asia Pacific Excluding Japan Sector Average 166.07

Europe excluding UK

Name 10 year fund performance %
Stonehage Fleming - European All Cap Equity 246.58
BlackRock - European Dynamic 208.7
Jupiter - European 200.87
BlackRock - Continental European 150.75
Threadneedle - European Select 147.23
Baillie Gifford - European 138.96
Europe Excluding UK Sector Average 84.39

Japan

Name 10 year fund performance %
Legg Mason - IF Japan Equity 163.9
Neptune - Japan Opportunities 110.43
Baillie Gifford - Japanese 108.71
Japan Sector Average 60.24

Mixed Investment 0%-35% Shares

Name 10 year fund performance %
Threadneedle - Navigator Cautious Managed Inc 75.96
Sarasin - Alpha CIF for Income & Reserves 71.92
Mixed Investment 0%-35% Shares Sector Average 38.93

Mixed Investment 20%-60% Shares

Name 10 year fund performance %
CF Ruffer - Total Return 117.22
AXA - Global Distribution 109.96
CF - Miton Cautious Multi Asset 82.26
Threadneedle - Equity & Bond 81.07
Invesco Perpetual - Distribution 80.42
Mixed Investment 20%-60% Shares Sector Average 47.2

Mixed Investment 40%-85% Shares

Name 10 year fund performance %
CF Ruffer - European 156.95
McInroy & Wood - Balanced Personal 142.54
EdenTree - Higher Income 120.16
Rathbone - Sussex Growth 108.3
Baillie Gifford - Managed 107.06
Mixed Investment 40%-85% Shares Sector Average 63.23

North America

Name 10 year fund performance %
Schroder - US Mid Cap 250.05
CF - Westchester 229.88
Fidelity - American Special Situations 204.03
AXA - Framlington American Growth 203.34
Threadneedle - American 200.32
North America Sector Average 153.25

Sterling Corporate Bond

Name 10 year fund performance %
M&G - Strategic Corporate Bond 101.71
M&G - Corporate Bond 88.67
Morgan Stanley - Sterling Corporate Bond 88.53
Henderson Inst - Long Dated Credit 82.73
L&G - Managed Monthly Income Trust 79.14
Sterling Corporate Bond Sector Average 53.5

Sterling High Yield

Name 10 year fund performance %
Invesco Perpetual - High Yield 90.84
Baillie Gifford - High Yield Bond 85.06
Sterling High Yield Sector Average 68.43

Sterling Strategic Bond

Name 10 year fund performance %
Fidelity - Strategic Bond 84.9
M&G - Charibond Gr 83.09
Invesco Perpetual - Monthly Income Plus 80.29
BlackRock Invest Mgrs UK Ltd - Charinco Common Invest Gr 79.4
Sterling Strategic Bond Sector Average 52.59

UK All Companies

Name 10 year fund performance %
MFM - Slater Growth 238.55
Royal London - UK Mid-Cap Growth 212.54
Standard Life Investments - UK Equity Unconstrained 207.69
Franklin - UK Mid Cap 204.51
F&C - UK Mid Cap 184.85
L&G - UK Alpha Trust 174.62
UK All Companies Sector Average 72.84

UK Smaller Companies

Name 10 year fund performance %
Marlborough - UK Micro Cap Growth 257.77
Schroder - UK Dynamic Smaller Companies 243.98
Liontrust - UK Smaller Companies 240.87
Marlborough - Special Situations 240.82
UK Smaller Companies Sector Average 117.6

 

The top performing funds over 5 years

Asia Pacific Excluding Japan

Name Fund 5 year performance %
Stewart Investors - Asia Pacific Sustainability 131.43
Stewart Investors - Asia Pacific 102.3
Schroder - Asian Alpha Plus 99.23
Schroder - Asian Income 95.59
Asia Pacific Excluding Japan Sector Average 69.43

Europe Excluding UK

Name Fund 5 year performance %
Marlborough - European Multi-Cap 125.87
FP CRUX - European Special Situations 125.27
BlackRock - European Dynamic 122.63
Jupiter - European 121.76
BlackRock - Continental European Income 119.59
Europe Excluding UK Sector Average 86.29

Japan

Name Fund 5 year performance %
Legg Mason - IF Japan Equity 269.69
AXA - Framlington Japan 128.68
Baillie Gifford - Japanese 120.16
CF - Morant Wright Nippon Yield 103.24
 Japan Sector Average 81.32

Mixed Investment 0%-35% Shares

Name Fund 5 year performance %
Fidelity - Multi Asset Income 48.23
Threadneedle - Navigator Cautious Managed 43.93
Sarasin - Alpha CIF for Income & Reserves 43.82
Vanguard - LifeStrategy 20% Equity 41.87
Mixed Investment 0%-35% Shares Sector Average 29.51

Mixed Investment 20%-60% Shares

Name Fund 5 year performance %
Royal London - Sustainable Diversified Trust 74.52
Premier - Multi-Asset Distribution 71.12
Invesco Perpetual - European High Income 69.23
Premier - Multi-Asset Monthly Income 67.96
FP - New Horizon Balanced Income & Growth 67.37
Mixed Investment 20%-60% Shares Sector Average 38.95

Mixed Investment 40%-85% Shares

Name Fund 5 year performance %
TM - UBS (UK) UK Growth 149.74
Royal London - Sustainable World Trust 108.07
Premier - Multi-Asset Growth & Income 91.05
Cornelian Asset Managers - SVS Cornelian Progressive 82.99
Alliance Trust - Sustainable Future Managed 81.69
Mixed Investment 40%-85% Shares Sector Average 53.23

North America

Name Fund 5 year performance %
Fidelity - American Special Situations 183.05
Old Mutual - North American Equity 171.91
VT - De Lisle America 167.6
CF - Westchester 164.69
SJP - North American 164.69
Schroder - US Mid Cap 161.25
North America Sector Average 125.31

Sterling Corporate Bond

Name Fund 5 year performance %
Henderson Inst - Long Dated Credit 52.97
Morgan Stanley - Sterling Corporate Bond 52.23
L&G - Managed Monthly Income Trust 52.21
Royal London - Corporate Bond 50.15
Kames - Investment Grade Bond 49.79
Rathbone - Ethical Bond 49.63
Sterling Corporate Bond Sector Average 38.66

Sterling High Yield

Name Fund 5 year performance %
Invesco Perpetual - High Yield 68.99
Schroder - Monthly High Income 66.97
Sterling High Yield Sector Average 44.92

Sterling Strategic Bond

Name Fund 5 year performance %
Artemis - High Income 64.84
AXA - Framlington Managed Income 56.66
TwentyFour - Dynamic Bond 53.79
Old Mutual - Bond 53.4
Royal Bank of Scot - High Yield 52.46
Invesco Perpetual - Monthly Income Plus 52.43
Sterling Strategic Bond Sector Average 36.61

Targeted Absolute Return

Name Fund 5 year performance %
CF Odey - Absolute Return
Argonaut - FP Argonaut Absolute Return 49.88
Henderson - European Absolute Return 40.39
S&W - Saltus Wealth 40.24
Targeted Absolute Return Sector Average 16.26

UK All Companies

Name Fund 5 year performance %
Old Mutual - UK Mid Cap 168.02
CFP - SDL UK Buffettology General 148.04
Neptune - UK Mid Cap 147.55
AXA - Framlington UK Mid Cap 146.54
Barclays - UK Lower Cap 144.66
UK All Companies Sector Average 70.12

UK Smaller Companies

Name Fund 5 year performance %
R&M - UK Equity Smaller Companies 200.91
Fidelity - UK Smaller Companies 167.94
Liontrust - UK Smaller Companies 158.77
Livingbridge VC LLP - Wood Street Microcap Investment 149.76
UK Smaller Companies Sector Average 98.05

 

The 10 Top Performing Fund Managers

Fund managers seldom outperform the market in the short term and almost never over the long term. Yet that doesn't mean you should just invest in index trackers or Exchange Traded Funds (ETFs). There is still a place for picking the best active investment fund managers. However the top performing investment fund managers historically won't outperform the market or their peers all of the time. The table in the last section of this article emphasises the impact on your returns of your misplaced loyalty to even the best fund managers. The key is to invest in the best funds when the investment environment suits them and to ditch them when it doesn't, in favour of their peers most likely to outperform. You should NEVER invest your money with a fund manager for the long term.

The table below shows the 10 top performing fund managers over the last five years. I analysed the returns of thousands of fund managers versus the level of risk they took with investors' money to arrive at the final table. The best investment fund managers do not gamble with investors' money , instead they invest it strategically to minimise any losses. The Sharpe Ratio is a measure of the level of excess return the fund manager earns for the extra risk he/she has taken. The higher the figure the better:

Name Fund(s) Sharpe Ratio
Ken Wotton Wood Street Microcap Investment 1.92
Julian Fosh Liontrust Special Situations / Liontrust UK Smaller Companies / Liontrust UK Growth 1.81
Anthony Cross Liontrust UK Smaller Companies / Liontrust Special Situations / Liontrust UK Growth 1.81
Martin Turner CF Miton UK Multi Cap Income / CF Miton UK Smaller Companies 1.79
Gervais Williams CF Miton UK Multi Cap Income / CF Miton UK Smaller Companies / FP Miton Income 1.77
Keith Ashworth-Lord CFP SDL UK Buffettology 1.73
James Foster Artemis Strategic Bond / Artemis Monthly Distribution 1.72
David Taylor MI Chelverton UK Equity Income / MI Chelverton UK Equity Growth 1.69
Terry Smith Fundsmith Equity 1.67
Simon Knott The MI Discretionary Unit 1.56

How to pick the best performing funds to invest in now

The key to successful investing is to pick the funds most likely to outperform their peers in the future. That is not the same as picking the funds or fund managers with the best performance over the last 5 or 10 years.

By way of example if you had picked the 10 best performing funds over 10 years
leading up to October 2011 (from the UK All Companies sector) and then invested in them over the next 5 years you'd have been in for a surprise. As the table below shows, over the next 5 years (to today) you would have been better off investing in alternative funds within the same sector.

Fund Performance rank 2001 to 2011 (out of 112) Performance rank 2011 to 2016 (out of 212)
Franklin - UK Mid Cap 1 83
Invesco Perpetual - UK Focus 2 27
Franklin - UK Opportunities 3 14
Cavendish - Opportunities 4 62
Artemis - UK Special Situations 5 100
Invesco Perpetual - High Income 6 84
Schroder - Recovery 7 18
Invesco Perpetual - Income 8 95
AXA - Framlington UK Select Opportunities 9 115
MFM - Bowland 10 138

 

So how can you choose the best funds to invest in right now? The world of fund management brainwashes investors in to thinking that you have to buy and hold a fund manager or fund. Yet why should you? The evidence overwhelmingly shows that no fund manager outperforms in every market condition. The fact that a fund manager or fund might top a table of the best performing managers (or funds) over 5 years is just a coincidence of the timeframe used. Use another timeframe (as shown above) and they won't come anywhere near the top. This is true of every fund, even the most popular investment funds. Invesco Perpetual Income, shown above, is a perfect example of a fund that historically was run cautiously and full of defensive shares such as pharmaceutical companies. In an economic downturn these shares and funds do well (after all, people still buy medicines in a recession) yet they underperform when the economy recovers.

So if you can't rely on long term performance tables to pick funds that are more likely to perform well in the future then how can you do it?

The key to investing in the right funds for the current environment is to use a process that screens out the noise and emotional headlines and focuses on the fundamentals. It's a very simple process that I explain in a short email series How to become a successful DIY investor. In the emails I show you:

  • The most important investment lesson you will ever learn based on over 100 years of research and experience
  • The simple and easy to use tool that will help you beat the market
  • The investment process fund managers want to keep to themselves.
  • How to know which funds to buy and which to sell, in minutes.

I have used the technique to help investors outperform the market and professional fund managers using only a few minutes a month, using 80-20 Investor. You can read their reviews of 80-20 Investor as well as see the performance in the widget at the foot of this article. I also successfully run £50,000 of my own money live on the site to show how simple it is. 80-20 Investor helps you to simply decide the funds to invest in via your existing funds platform. Find out more about how the service works and take advantage of a 30 day FREE trial.