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 44 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. There are only two funds within the list that currently appear in either the BFBS or BOTB lists and these are highlighted in bold. That is a reflection of the recent rotation we've seen into value stocks.
| Name | Sector | ISIN Code | 1 month return % | 3 month return % | 6 month return % | Max weekly fall in last 6 months | Ongoing charge |
| JPM Asia Growth | Asia Pacific Excluding Japan | GB0030879695 | 2.45 | -1.55 | 12.29 | -10.53 | 1.63 |
| Schroder Asian Alpha Plus | Asia Pacific Excluding Japan | GB00B5BG4980 | 2.28 | 1.33 | 16.25 | -6.05 | 0.92 |
| Baillie Gifford European | Europe Excluding UK | GB0006058258 | 9.56 | 9.37 | 17.15 | -8.13 | 0.58 |
| BlackRock European Dynamic | Europe Excluding UK | GB00B5W2QB11 | 9.06 | 10.19 | 24.64 | -6.04 | 0.92 |
| Brown SVS Brown Shipley Dynamic | Flexible Investment | GB00B3K4J724 | 5.3 | 5.66 | 17.99 | -3.29 | 1.34 |
| Liontrust Global Alpha | Flexible Investment | GB0031190555 | 13.42 | 9.04 | 11.71 | -14.22 | 0.9 |
| Liontrust Sustainable Future Managed Growth | Flexible Investment | GB0030029622 | 7.88 | 6.72 | 14.21 | -6.3 | 0.89 |
| Baillie Gifford Emerging Markets Growth | Global Emerging Markets | GB0006020647 | 4.85 | -2.05 | 15.28 | -13.73 | 0.76 |
| Baillie Gifford Emerging Markets Leading Companies | Global Emerging Markets | GB00B06HZN29 | 3.12 | -2.73 | 13.64 | -12.1 | 0.76 |
| BlackRock Emerging Markets | Global Emerging Markets | GB00B4R9F681 | 3.08 | 2.43 | 21.3 | -8.91 | 0.95 |
| JPM Emerging Markets | Global Emerging Markets | GB0030881550 | 5.18 | -2.73 | 8.9 | -14.4 | 1.58 |
| Schroder Global Emerging Markets | Global Emerging Markets | GB00B76V5Q67 | 2.89 | -0.34 | 15.11 | -7.69 | 0.95 |
| Baillie Gifford Global Income Growth | Global Equity Income | GB0005772586 | 6.84 | 6.08 | 15.59 | -6.58 | 0.53 |
| Baillie Gifford Global Alpha Growth | Global | GB00B61DJ021 | 6.77 | 6.53 | 19 | -8.1 | 0.59 |
| Baillie Gifford International | Global | GB0005941272 | 7.09 | 5.93 | 18.02 | -8.67 | 0.59 |
| Fidelity Global Focus | Global | GB00B3RDH349 | 6.87 | 5.21 | 18.95 | -8.58 | 0.94 |
| Ninety One Global Equity | Global | GB00B01VDL32 | 5.68 | 8.6 | 19.36 | -4.31 | 0.88 |
| Rathbone Global Opportunities Fund | Global | GB0030349095 | 8.94 | 8.57 | 11.44 | -8.83 | 1.52 |
| Threadneedle Japan | Japan | GB0001529121 | -1.32 | -3.61 | 6.87 | -7.39 | 1.66 |
| L&G Mixed Investment 0-35% | Mixed Investment 0-35% Shares | GB00B8KRCM23 | 1.63 | 1.53 | 7.14 | -1.96 | 0.44 |
| Omnis Investments Ltd Omnis Managed Cautious | Mixed Investment 0-35% Shares | GB00B3V31059 | 2.15 | 0.69 | 6.16 | -3.09 | 0.88 |
| Baillie Gifford Managed | Mixed Investment 40-85% Shares | GB0006010168 | 5.43 | 2.93 | 13.33 | -7.03 | 0.42 |
| Liontrust Balanced | Mixed Investment 40-85% Shares | GB00B85K7211 | 7.35 | 4.89 | 7.08 | -7.09 | 0.85 |
| Liontrust Sustainable Future Managed | Mixed Investment 40-85% Shares | GB0030030398 | 6.19 | 6.03 | 13.79 | -4.61 | 0.87 |
| Baillie Gifford American | North America | GB0006061963 | 10.79 | -1.03 | 21.15 | -19.21 | 0.51 |
| iShares North American Equity Index (UK) | North America | GB00B7QK1Y37 | 6.53 | 10 | 18.14 | -4.37 | 0.07 |
| Threadneedle American Select | North America | GB0001529238 | 8.17 | 11.48 | 19.19 | -5.57 | 1.62 |
| UBS US Growth | North America | GB00B7VHZX64 | 10.75 | 8.29 | 13.51 | -9.23 | 0.83 |
| JPM US Small Cap Growth | North American Smaller Companies | GB0030880032 | 7.94 | 0.25 | 19.33 | -12.35 | 1.43 |
| AXA Framlington Fintech | Specialist | GB00B5BHKC62 | 6.99 | 10.82 | 21.18 | -6.14 | 0.87 |
| Jupiter Financial Opportunities | Specialist | GB0004790191 | 5.42 | 8.42 | 14 | -6.55 | 1.73 |
| Jupiter Global Financial Innovation | Specialist | GB00B551H564 | 7.74 | 5.67 | 17.42 | -15.33 | 1.49 |
| Schroder Sterling Corporate Bond | Sterling Corporate Bond | GB0009379370 | 0.88 | -0.36 | 6.07 | -1.99 | 0.59 |
| EdenTree Responsible and Sustainable Sterling Bond | Sterling Strategic Bond | GB00B2PF8D20 | 0.53 | -0.31 | 2.58 | -1.67 | 0.59 |
| Baillie Gifford UK Equity Alpha | UK All Companies | GB0005858195 | 4.17 | 4.44 | 17.56 | -5.23 | 0.56 |
| BlackRock UK Special Situations | UK All Companies | GB00B3V1C060 | 6.86 | 13.64 | 33.51 | -4.64 | 0.92 |
| EdenTree Responsible and Sustainable UK Equity Opportunities | UK All Companies | GB0008446063 | 7.17 | 12.98 | 34.99 | -3.82 | 0.8 |
| Liontrust Sustainable Future UK Growth | UK All Companies | GB0030028764 | 4.13 | 9.61 | 27.67 | -4.03 | 0.87 |
| Liontrust UK Ethical | UK All Companies | GB00B8HCSD36 | 4.45 | 10.78 | 33.58 | -4.31 | 0.82 |
| Royal London UK Dividend Growth | UK All Companies | GB00B63DTG61 | 5.29 | 11.05 | 31.04 | -5.37 | 0.71 |
| AXA Framlington Monthly Income | UK Equity Income | GB00B7MMK577 | 5.72 | 12.27 | 36.14 | -3.66 | 0.84 |
| LF Montanaro UK Income | UK Equity Income | GB00BJRCFW88 | 6.3 | 10.94 | 22.69 | -4.7 | 0.8 |
| FP Octopus UK Micro Cap Growth | UK Smaller Companies | GB00BYQ7HN43 | 6.63 | 13.89 | 41.6 | -2.1 | 1.25 |
| TB TB Amati UK Smaller Companies | UK Smaller Companies | GB00B2NG4R39 | 4.99 | 12.14 | 37.52 | -3.39 | 0.89 |
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.
