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 45 funds (out of 1,200 unit trusts) 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 also 18 funds (the largest number we've ever seen) within the list that currently appear in either the BFBS or BOTB lists and these are highlighted in bold.
| Name | Sector | ISIN Code | 1 month return % | 3 month return % | 6 month return % | Max weekly fall in last 6 months | Ongoing charge |
| BlackRock European Dynamic | Europe Excluding UK | GB00B5W2QB11 | 2.57 | 9.41 | 23.97 | -2.44 | 0.92 |
| Brown SVS Brown Shipley Dynamic | Flexible Investment | GB00B3K4J724 | 1.11 | 5.51 | 10.62 | -4.02 | 1.34 |
| LF Ruffer Japanese | Flexible Investment | GB00B846SB60 | 8.05 | 10.65 | 13.17 | -5.99 | 1.24 |
| Liontrust Sustainable Future Managed Growth | Flexible Investment | GB0030029622 | 2.77 | 12.13 | 18.46 | -6.24 | 0.89 |
| Margetts Sentinel Enterprise Portfolio | Flexible Investment | GB00B7HJSF95 | 2.04 | 11.2 | 17.32 | -4.95 | 0.81 |
| Baillie Gifford Global Alpha Growth | Global | GB00B61DJ021 | 1.1 | 6.95 | 8 | -8.6 | 0.59 |
| Baillie Gifford International | Global | GB0005941272 | 0.82 | 6.71 | 7.54 | -8.4 | 0.59 |
| BMO Sustainable Opportunities Global Equity | Global | GB0008464207 | 1.37 | 11.91 | 17.33 | -4.8 | 2.11 |
| Liontrust Sustainable Future Global Growth | Global | GB0030030067 | 2.84 | 12.49 | 19.12 | -6.44 | 0.88 |
| Ninety One Emerging Markets Local Currency Debt | Global EM Bonds - Local Currency | GB00B3TB1H89 | 1.24 | 0.11 | 2.88 | -1.38 | 0.92 |
| BlackRock Emerging Markets | Global Emerging Markets | GB00B4R9F681 | -0.82 | -4.7 | -5.41 | -9.79 | 0.95 |
| Jupiter Japan Income | Japan | GB00B0HZTZ55 | 7.08 | 10.33 | 12.31 | -5.91 | 1.73 |
| Omnis Investments Ltd Omnis Managed Cautious | Mixed Investment 0-35% Shares | GB00B3V31059 | -0.02 | 2.58 | 5.09 | -2.62 | 0.88 |
| AXA Global Distribution | Mixed Investment 20-60% Shares | GB0008309063 | 0.32 | 4.1 | 8.9 | -1.97 | 0.78 |
| Liontrust MA Active Intermediate Income | Mixed Investment 20-60% Shares | GB00BCZW6F19 | 0.51 | 3.42 | 7.63 | -2.75 | 1.11 |
| Baillie Gifford Managed | Mixed Investment 40-85% Shares | GB0006010168 | 0.92 | 7.24 | 10.08 | -6.99 | 0.42 |
| BlackRock Balanced Growth Portfolio | Mixed Investment 40-85% Shares | GB00B7XQBS82 | 0.76 | 3.95 | 9.36 | -1.72 | 0.87 |
| COIF Charities Investment | Mixed Investment 40-85% Shares | GB0001877652 | 2.56 | 8.27 | 15.42 | -3.32 | |
| Liontrust Sustainable Future Managed | Mixed Investment 40-85% Shares | GB0030030398 | 1.91 | 9.26 | 15.03 | -4.57 | 0.87 |
| MFM Hathaway | Mixed Investment 40-85% Shares | GB0032395336 | 0.19 | 4.54 | 11.01 | -1.82 | 1.17 |
| iShares North American Equity Index (UK) | North America | GB00B7QK1Y37 | -0.19 | 7.79 | 14.45 | -3.31 | 0.07 |
| Ninety One American Franchise | North America | GB00B1XFJ342 | 0.9 | 11.25 | 20.62 | -3.64 | 0.83 |
| Threadneedle American Extended Alpha | North America | GB00B28B7B81 | 0.21 | 9.45 | 18.19 | -5.84 | 1.67 |
| Jupiter Financial Opportunities | Specialist | GB0004790191 | -0.38 | 4.96 | 6.29 | -3.54 | 1.73 |
| Liontrust Russia | Specialist | GB00B86WB793 | 5.7 | 9.62 | 22.26 | -3.14 | 0.98 |
| Stewart Investors Global Emerging Markets Sustainability | Specialist | GB00B64TS998 | 1.61 | 4.4 | 9.33 | -3.43 | 0.94 |
| Rathbone Ethical Bond Fund | Sterling Corporate Bond | GB0030957137 | 0.03 | 1.26 | 3.2 | -0.92 | 1.28 |
| Schroder Sterling Corporate Bond | Sterling Corporate Bond | GB0009379370 | -0.15 | 1.61 | 4.24 | -0.51 | 0.59 |
| Royal London Ethical Bond | Sterling Strategic Bond | GB00BJ4KSX76 | -0.19 | 1.53 | 3.45 | -0.71 | 0.55 |
| BNY Mellon Multi-Asset Diversified Return | Targeted Absolute Return | GB00B7Y64D35 | -0.25 | 0.17 | 1.56 | -1.35 | 0.86 |
| ASI UK Mid Cap Equity | UK All Companies | GB00B0XWNQ97 | 3.53 | 12.6 | 24.23 | -2.87 | 1.3 |
| AXA Framlington UK Mid Cap | UK All Companies | GB00B64W4Q70 | 1.4 | 7.3 | 17.03 | -1.72 | 0.84 |
| BlackRock UK Special Situations | UK All Companies | GB00B3V1C060 | 0.52 | 4.88 | 15.95 | -2.23 | 0.92 |
| BMO Responsible UK Equity | UK All Companies | GB0030833981 | 0.4 | 4.67 | 15.59 | -1.44 | 1.71 |
| Liontrust Sustainable Future UK Growth | UK All Companies | GB0030028764 | 1.15 | 8.41 | 14.16 | -2.95 | 0.87 |
| Liontrust UK Ethical | UK All Companies | GB00B8HCSD36 | 0.86 | 6.02 | 12.81 | -2.4 | 0.82 |
| Royal London UK Mid-Cap Growth | UK All Companies | GB00B5BRW420 | 0.91 | 8.03 | 19.16 | -2.14 | 0.77 |
| Slater Growth | UK All Companies | GB00B0706C66 | 2.38 | 8.57 | 20.89 | -1.57 | 1.57 |
| Slater Recovery | UK All Companies | GB0031554248 | 2.62 | 7.27 | 19.59 | -1.54 | 1.58 |
| Allianz UK Listed Equity Income | UK Equity Income | GB00B82ZGC20 | -0.12 | 3.41 | 12.68 | -2.18 | 0.65 |
| Aviva Inv UK Listed Equity Income | UK Equity Income | GB0004457197 | 0.09 | 3.74 | 11.66 | -1.92 | 1 |
| LF Montanaro UK Income | UK Equity Income | GB00BJRCFW88 | 1.87 | 11.65 | 23.7 | -1.05 | 0.8 |
| iShares UK Gilts All Stocks Index (UK) | UK Gilts | GB00B83HGR24 | -1.06 | 1.8 | 2.81 | -1.7 | 0.11 |
| Royal London UK Government Bond | UK Gilts | GB00B881TW52 | -0.98 | 1.7 | 2.65 | -1.63 | 0.45 |
| Royal London Index Linked | UK Index Linked Gilts | GB00B8DDWW71 | 1.49 | 6.83 | 12.69 | -2.13 | 0.36 |
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