The funds for consistent returns – Update May 2021

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

 

 

 

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