The funds for consistent returns – Update August 2020

I'm fundamentally opposed to buying and holding actively managed funds for the long-term as you are more likely to make more money by regularly reviewing them.

However, I understand that there are times when you might not want to or can't switch your funds as often as you might want. For example, you may have a pension scheme which offers a limited choice of funds or restricts the number of switches you can perform. Or it may be that you like to have a core stable selection of funds in your portfolio around which you more actively invest to boost returns.

You will probably already be familiar with my Perfect ISA Portfolio which focussed on the perfect asset mix for consistent returns. However a few years ago I carried out a piece of research identifying funds for consistent returns. In other words, are there any funds out there that seem to consistently outperform their peers which aren't just focused on capital preservation? But taking this one step further are there any such funds which are also good momentum plays, as identified by our 80-20 Investor algorithm? So I've gone back and refreshed the research and below I describe how I did just that.

Long-term outperformance screen

It's a fact that 90% of fund managers fail to beat the market over the long term which has been shown by numerous pieces of research. Yet there are a few that have. However, judging overperformance or underperformance based on an arbitrary time frame can give a skewed result.

So instead I decided to analyse the performance of every unit trust out there (over 1,200 of them) versus each other over multiple time frames to produce a shortlist. I only shortlisted those funds that outperformed the average of their peer group (sector) over the following time periods:

• 1 year
• 3 years
• 5 years
• 10 years

Then to include an element of consistency the funds also had to show a similar level of outperformance in each of the last 5 years.

I also wanted to make sure that they were genuinely beating the market rather than simply doing better than their dud peers. So I also added a few screens which give an indication of fund manager skill. This would limit the likelihood that a fund manager had simply managed any outperformance by taking excessive risks in a rising market. These additional screens were namely:

Alpha

Alpha is a figure which measures a manager’s apparent skill at picking winning investments versus their benchmark. Alpha is the excess return versus the return of a fund’s benchmark (i.e the market). So a fund with a positive alpha indicates that the fund manager has outperformed through skill. While a negative alpha figure would indicate underperformance.

Sharpe ratio

The sharpe ratio is not a widely known statistic yet it indicates how much extra return a fund manager has achieved for the increased risk they have taken. There is nothing wrong with fund managers taking calculated investment risks if they result in additional returns for investors. So the higher a fund’s sharpe ratio the better.

Maximum Drawdown

Finally, I analysed how the funds had performed over the last 3 years and what the maximum fall during the period was for each fund. I then only included those with the lowest drawdowns versus their peers. 80-20 Investor tables include the drawdown figure (Max Fall) as it is useful but not published widely.

80-20 Investor algorithm screen

The above screening left 32 funds (out of 1,200 funds) which have shown a consistency of return over the medium to long-term (in various market conditions), yet doing so without taking unnecessary risk. The funds are shown below.

In this update of the most 'consistent funds' research, I have highlighted in green those funds that retained their place in the list from the previous update. I have highlighted funds that appear in the current BFBS table and have retained their place in the consistent funds list in blue. While the funds that are in the current BFBS but weren't in the previous consistent funds list are coloured orange.

 

Name	Sector	ISIN Code	1 month return	3 months return	6 month return	Max weekly fall in last 6 months	Ongoing charge
ASI Europe ex UK Ethical Equity	Europe Excluding UK	GB00B3N24788	4.47	21.34	7.21	-22.81	0.92
Baillie Gifford European	Europe Excluding UK	GB0006058258	6.88	28.87	21.39	-21.95	0.58
Baillie Gifford Global Alpha Growth	Global	GB00B61DJ021	4.26	18.51	10.32	-22.25	0.6
Baillie Gifford Global Income Growth	Global Equity Income	GB0005772586	3.92	13.69	3.04	-18.51	0.6
Baillie Gifford International	Global	GB0005941272	4.45	19.17	11.56	-21.5	0.6
Baillie Gifford Managed	Mixed Investment 40-85% Shares	GB0006010168	3.32	17.31	13.05	-17.19	0.42
BlackRock European Dynamic	Europe Excluding UK	GB00B5W2QB11	2.78	20.63	7.34	-24.14	0.92
BlackRock UK	UK All Companies	GB00B5YKQK23	1.52	10.74	-5.3	-28.08	0.92
BMO Responsible Global Equity	Global	GB0030833650	2.67	14.42	6.69	-19.89	1.62
COIF Charities Investment	Mixed Investment 40-85% Shares	GB0001877652	3.99	8.59	0.44	-19.74
Fidelity Asia	Asia Pacific Excluding Japan	GB00B6Y7NF43	5.72	15.85	7.63	-15.71	0.94
Fidelity Global Focus	Global	GB00B3RDH349	3.57	13.33	6.8	-21.11	0.93
FP Octopus UK Micro Cap Growth	UK Smaller Companies	GB00BYQ7HN43	1.04	5.73	-3.61	-27.95	1.25
HSBC American Index	North America	GB0000469741	1.75	8.21	-0.48	-20.82	0.16
iShares Japan Equity Index (UK)	Japan	GB00B6QQ9X96	-3.44	3.55	-3.19	-19.87	0.08
JPM Asia Growth	Asia Pacific Excluding Japan	GB00B1XMSK57	4.28	15.77	9.65	-14.59	1.65
JPM Emerging Markets	Global Emerging Markets	GB0030881550	4.31	20.17	5.31	-20.58	1.58
L&G All Stocks Gilt Index Trust	UK Gilts	GB00B8344798	-0.08	0.35	5.64	-2.55	0.15
LF Waverton Portfolio	Flexible Investment	GB00B1RDGP55	1	5.78	1.03	-14.47	0.88
Liontrust Sustainable Future Managed	Mixed Investment 40-85% Shares	GB0030030398	1.1	10.61	4.56	-19.68	0.89
Liontrust Sustainable Future Managed Growth	Flexible Investment	GB0030029622	1.08	14.26	11.47	-19.73	0.91
Liontrust Sustainable Future UK Growth	UK All Companies	GB0030028764	0.11	4.72	-12.09	-30.51	0.89
Morgan Stanley Global Brands	Global	GB0032482498	2.96	8.11	4.54	-15.7	0.9
Rathbone Global Opportunities Fund	Global	GB0030349095	2.44	16.84	11.78	-19.52	1.53
Royal London Ethical Bond	Sterling Strategic Bond	GB00BJ4KSX76	1.54	4.26	0.86	-9.64	0.55
Royal London Index Linked	UK Index Linked Gilts	GB00B8DDWW71	0.49	6	8.05	-11.11	0.36
Sarasin Global Equity Real Return	Mixed Investment 40-85% Shares	GB00B7W4B053	3.75	8.07	0.66	-17.19	0.98
Stewart Investors Asia Pacific Sustainability	Specialist	GB00B0TY6V50	2.42	12.35	1.99	-16.37	0.98
Stewart Investors Global Emerging Markets Sustainability	Specialist	GB00B64TS998	4.53	13.37	1.3	-16.06	0.98
TB TB Amati UK Smaller Companies	UK Smaller Companies	GB00B2NG4R39	2.96	9.13	-11.56	-35.38	0.89
Threadneedle European Smaller Companies	European Smaller Companies	GB0001531424	4.02	18.03	5.71	-22.78	1.69
Threadneedle Global Select	Global	GB0001444701	2.42	9.66	3.33	-18.23	1.63

 

 

The material in any email, the MonetotheMasses.com website, associated pages / channels / accounts and any other correspondence are for general information only and do not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. See full Terms & Conditions , Privacy Policy and Disclaimer.

Neither MoneytotheMasses.com/80-20 Investor nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Funds invest in shares, bonds, and other financial instruments and are by their nature speculative and can be volatile. You should never invest more than you can safely afford to lose. The value of your investment can go down as well as up so you may get back less than you originally invested.

Information provided by MoneytotheMasses.com/80-20 Investor is for general information only and not intended to be relied upon by readers in making (or not making) specific investment decisions.

Appropriate independent advice should be obtained before making any such decisions. Leadenhall Learning (owner of MoneytotheMasses.com/80-20 Investor) and its staff do not accept liability for any loss suffered by readers as a result of any such decisions.

The tables and graphs are derived from data supplied by Trustnet. All rights Reserved.