The funds for consistent returns – Update September 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 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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