17 min Read
20 Feb 2018

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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The best performing funds to invest in right now

The best performing funds to invest in right now

Finding the best performing funds to invest in right now

In this article I highlight the best performing funds over 10 years and 5 years. I also highlight the best investment fund managers in the UK. Yet you shouldn’t just focus on past performance over 5 or 10 years alone.

As one of the most frequently quoted investment experts in the UK national press, including The Times and The Telegraph, I will show you how to pick the best performing funds to invest now. That is very different from simply opting for the best performing funds over the last 5 or 10 years.

In fact I would invest in hardly any of the top performing funds over the last 5 or 10 years and neither should you

Funds are inconsistent and you should invest in funds that suit the current economic and investment environment. I will show you how I successfully identify the best funds to invest in with an increased chance of performing well going forward.

First of all...the funds to avoid

Before I move on to the best funds to invest in it's also important to be aware of the funds to avoid. Unfortunately, there are a number of popular funds that should be avoided as they will hit your returns. You can download a useful list of these funds which the research calls 'dog funds'. So download the guide and use it as a reference point.

Best performing investment funds to invest in

The tables below show the best performing funds to invest in over 5 years and 10 years. All these funds can be held in a Stocks and Shares ISA or a Self Invested Personal Pension (SIPP). The percentage return shown is the total return figures which assumes all income and dividends are reinvested. The funds are grouped by fund sector so you can see the best performing funds for the most popular fund sectors. We have shown the top decile performers, rather than the top 10 investment funds, for each sector because each sector contains a different number of funds.

While the funds below would have been the best funds to invest in over the last 10 years and 5 years,  within their respective sectors, there is no evidence that they will continue to perform well as I show later. In fact taking such a long term view masks long periods of underperformance. I elaborate on this below in the section titled How to pick the best performing funds to invest in now.

The top performing funds over 10 years

Asia Pacific Excluding Japan

Fund 10 year fund performance %
Schroder Asian Alpha Plus 223.36
Invesco Perpetual Asian 203.93
Schroder Asian Income 187.31
Stewart Investors Asia Pacific 179.73
Asia Pacific Excluding Japan sector average 119.5

Europe excluding UK

Fund 10 year fund performance %
BlackRock European Dynamic 246.36
Stonehage Fleming European All Cap Equity 227.26
Jupiter European 222.14
Baillie Gifford European 192.78
BlackRock Continental European 170.53
Europe Excluding UK sector average 95.11

Japan

Fund 10 year fund performance %
Legg Mason IF Japan Equity 565.92
Fidelity Japan Smaller Companies 249.33
Baillie Gifford Japanese 245.21
Neptune Japan Opportunities 220.94
M&G Japan 212.9
Japan sector average 131.74

Mixed Investment 0%-35% Shares

Fund 10 year fund performance %
Fidelity Multi Asset Income 74.77
LF Prudential Dynamic Focused 0-30 Portfolio 73.28
Threadneedle Navigator Cautious Managed 73.07
Sarasin Alpha CIF for Income & Reserves 65.51
MI Charles Stanley Monthly High Income 65.49
Mixed Investment 0-35% Shares sector average 43.78

Mixed Investment 20%-60% Shares

Fund 10 year fund performance %
AXA Global Distribution 110
LF Ruffer Total Return 102.32
M&G Episode Allocation 98.47
Threadneedle Navigator Balanced Managed 93.77
Invesco Perpetual Distribution 91.91
Mixed Investment 20-60% Shares sector average 54.35

Mixed Investment 40%-85% Shares

Fund 10 year fund performance %
Baillie Gifford Managed 141.02
MFM Hathaway 128.52
McInroy & Wood Balanced 120.52
Premier Multi-Asset Growth & Income 120.51
Mixed Investment 40-85% Shares sector average 70.55

North America

Fund 10 year fund performance %
Baillie Gifford American 304.85
Threadneedle American Extended Alpha 267.89
Schroder US Mid Cap 251.42
GAM North American Growth 246.51
AXA Framlington American Growth 243.77
North America sector average 187.28

Sterling Corporate Bond

Fund 10 year fund performance %
M&G Strategic Corporate Bond 109.64
Aberdeen Sterling Long Dated Corporate Bond 101.34
Janus Henderson Inst Long Dated Credit 99.04
Morgan Stanley Sterling Corporate Bond 98.57
M&G Corporate Bond 93.24
Sterling Corporate Bond sector average 64.1

Sterling High Yield

Fund 10 year fund performance %
Invesco Perpetual High Yield 129.36
Baillie Gifford High Yield Bond 122.26
Schroder High Yield Opportunities 110.57
Kames High Yield Bond 93.2
AXA Global High Income 92.33
Sterling High Yield sector average 89.16

Sterling Strategic Bond

Fund 10 year fund performance %
M&G Optimal Income 114.22
Invesco Perpetual Monthly Income Plus 102.92
Baillie Gifford Corporate Bond 100.26
L&G Dynamic Bond Trust 99.75
Artemis High Income 97.37
Sterling Strategic Bond sector average 62.42

UK All Companies

Fund 10 year fund performance %
Slater Growth 349.86
Liontrust Special Situations 283.43
Royal London UK Mid-Cap Growth 258.34
Standard Life Investments UK Equity Unconstrained 243.25
Franklin UK Mid Cap 241.79
UK All Companies sector average 87.87

UK Smaller Companies

Fund 10 year fund performance %
Liontrust UK Smaller Companies 378.13
Marlborough UK Micro Cap Growth 347.14
R&M UK Equity Smaller Companies 342.18
TB TB Amati UK Smaller Companies 331.62
Schroder UK Dynamic Smaller Companies 312.07
UK Smaller Companies sector average 179.37

The top performing funds over 5 years

Asia Pacific Excluding Japan

Fund 5 year fund performance %
Old Mutual Asia Pacific 92.5
Invesco Perpetual Asian 87.23
Baillie Gifford Pacific 85.41
Fidelity Emerging Asia 83.35
Baring Eastern Trust 81.98
 Asia Pacific Excluding Japan sector average  52.37

Europe Excluding UK

Fund 5 year fund performance %
Marlborough European Multi-Cap 116.58
Schroder European Alpha Income 99.98
Invesco Perpetual European Equity 91.28
Jupiter European 86.16
Baillie Gifford European 85.07
 Europe Excluding UK sector average  66.91

Japan

Fund 5 year fund performance %
Legg Mason IF Japan Equity 287.04
AXA Framlington Japan 151.31
Baillie Gifford Japanese 145.64
JPM Japan 139.12
Fidelity Japan Smaller Companies 135.29
 Japan sector average  93.14

Mixed Investment 0%-35% Shares

Fund 5 year fund performance %
Royal London Sustainable Managed Growth Trust 37.48
Fidelity Multi Asset Income 29.8
BlackRock NURS II Consensus 35 29.04
JPM Global Macro Balanced 28.75
OM Cirilium Conservative Portfolio 27.95
 Mixed Investment 0-35% Shares sector average  19.1

Mixed Investment 20%-60% Shares

Fund 5 year fund performance %
Artemis Monthly Distribution 61.84
Royal London Sustainable Diversified Trust 52.67
Premier Liberation V 49.66
Premier Multi-Asset Distribution 48.07
Invesco Perpetual European High Income 46.02
 Mixed Investment 20-60% Shares sector average  27.54

Mixed Investment 40%-85% Shares

Fund 5 year fund performance %
Royal London Sustainable World Trust 82.19
Orbis Global Balanced 75.64
MFM Hathaway 67.13
Premier Multi-Asset Growth & Income 65.92
Rathbone Sussex Growth 64.68
 Mixed Investment 40-85% Shares sector average  39.04

North America

Fund 5 year fund performance %
Baillie Gifford American 147.12
Old Mutual North American Equity 142.23
UBS US Growth 119.73
SJP North American 116.87
Franklin US Opportunities 115.72
 North America sector average  98.21

Sterling Corporate Bond

Fund 5 year fund performance %
F&C Institutional Long Dated Corporate Bond 50.89
Janus Henderson Inst Long Dated Credit 38.4
Aberdeen Sterling Long Dated Corporate Bond 37.34
Royal London Corporate Bond 33.6
Rathbone Ethical Bond 33.17
 Sterling Corporate Bond sector average  23.16

Sterling High Yield

Fund 5 year fund performance %
Schroder High Yield Opportunities 46.36
Aberdeen European High Yield Bond 31.12
Baillie Gifford High Yield Bond 30.38
AXA Pan European High Yield Bond 30.3
Invesco Perpetual High Yield 30.21
 Sterling High Yield sector average  23.93

Sterling Strategic Bond

Fund 5 year fund performance %
Artemis High Income 37.68
AXA Framlington Managed Income 36.24
TwentyFour Focus Bond 34.32
Baillie Gifford Corporate Bond 34.02
Royal London Ethical Bond 32.62
 Sterling Strategic Bond sector average  19.96

UK All Companies

Fund 5 year fund performance %
Old Mutual UK Mid Cap 125.31
CFP SDL UK Buffettology 120.26
MFM Bowland 119.36
Slater Growth 107.4
Barclays UK Lower Cap 101
 UK All Companies sector average  48.65

UK Smaller Companies

Fund 5 year fund performance %
LF Livingbridge UK Micro Cap 149.27
Discretionary Unit Fund Mgrs Ltd The MI Discretionary Unit 141.77
TB TB Amati UK Smaller Companies 140.58
R&M UK Equity Smaller Companies 136.8
MFM Techinvest Special Situations 134.46
 UK Smaller Companies sector average  90.37

The 10 Top Performing Fund Managers

Fund managers seldom outperform the market in the short term and almost never over the long term. Yet that doesn't mean you should just invest in index trackers or Exchange Traded Funds (ETFs). There is still a place for picking the best active investment fund managers. However the top performing investment fund managers historically won't outperform the market or their peers all of the time. The table in the last section of this article emphasises the impact on your returns of your misplaced loyalty to even the best fund managers. The key is to invest in the best funds when the investment environment suits them and to ditch them when it doesn't, in favour of their peers most likely to outperform. You should NEVER invest your money with a fund manager for the long term.

The table below shows the 10 top performing fund managers over the last five years. I analysed the returns of thousands of fund managers versus the level of risk they took with investors' money to arrive at the final table. The best investment fund managers do not gamble with investors' money, instead they invest it strategically to minimise any losses. The Sharpe Ratio is a measure of the level of excess return the fund manager earns for the extra risk he/she has taken. The higher the figure the better. You will notice there is no mention of Neil Woodford.

Name Fund(s) Sharpe ratio
Roger Skeldon / Nigel Ashfield Commercial Freehold co-manager 1.95
Simon Knott The MI Discretionary Unit 1.76
David Stevenson / Douglas Lawson / Dr. Paul Jourdan TB Amati UK Smaller Companies 1.57
Giles Hargreave Marlborough Special Situations / Marlborough UK Micro Cap Growth / Marlborough Nano Cap Growth 1.47
Martin Turner LF Miton UK Multi Cap Income / LF Miton UK Smaller Companies 1.46
Keith Ashworth-Lord CFP SDL UK Buffettology 1.44
Nick Greenwood LF Miton Worldwide Opportunities 1.32
Rob Ford / Ben Hayward / Aza Teeuwen TwentyFour Focus Bond / TwentyFour Asset Backed Income / TwentyFour Monument Bond 1.31
Henry Lowson Royal London UK Smaller Companies / Royal London UK Mid-Cap Growth 1.3
Terry Smith Fundsmith Equity 1.29

How to pick the best performing funds to invest in now

The key to successful investing is to pick the funds most likely to outperform their peers in the future. That is not the same as picking the funds or fund managers with the best performance over the last 5 or 10 years.

By way of example if you had picked the 10 best performing funds over 10 years
leading up to October 2011 (from the UK All Companies sector) and then invested in them over the next 5 years you'd have been in for a surprise. As the table below shows, over the next 5 years you would have been better off investing in alternative funds within the same sector.

Fund Performance rank 2001 to 2011 (out of 112) Performance rank 2011 to 2016 (out of 212)
Franklin - UK Mid Cap 1 83
Invesco Perpetual - UK Focus 2 27
Franklin - UK Opportunities 3 14
Cavendish - Opportunities 4 62
Artemis - UK Special Situations 5 100
Invesco Perpetual - High Income 6 84
Schroder - Recovery 7 18
Invesco Perpetual - Income 8 95
AXA - Framlington UK Select Opportunities 9 115
MFM - Bowland 10 138

So how can you choose the best funds to invest in right now? The world of fund management brainwashes investors into thinking that you have to buy and hold a fund manager or fund. Yet why should you? The evidence overwhelmingly shows that no fund manager outperforms in every market condition. The fact that a fund manager or fund might top a table of the best performing managers (or funds) over 5 years is just a coincidence of the timeframe used. Use another timeframe (as shown above) and they won't come anywhere near the top. This is true of every fund, even the most popular investment funds. Invesco Perpetual Income, shown above, is a perfect example of a fund that historically was run cautiously and full of defensive shares such as pharmaceutical companies. In an economic downturn these shares and funds do well (after all, people still buy medicines in a recession) yet they underperform when the economy recovers.

So if you can't rely on long term performance tables to pick funds that are more likely to perform well in the future then how can you do it?

The key to investing is to choose the best funds to invest in for the current environment and to use a process that screens out the noise and emotional headlines and focuses on the fundamentals. It's a very simple process that I explain in a short email series How to become a successful DIY investor. In the emails I show you:

  • The most important investment lesson you will ever learn based on over 100 years of research and experience
  • The simple and easy to use tool that will help you beat the market
  • The investment process fund managers want to keep to themselves.
  • How to know which funds to buy and which to sell, in minutes.

I have used the technique to help investors outperform the market and professional fund managers using only a few minutes a month, using 80-20 Investor. You can read their reviews of 80-20 Investor as well as see the performance in the widget at the foot of this article. I also successfully run £50,000 of my own money live on the site to show how simple it is. 80-20 Investor helps you to simply decide the funds to invest in via your existing fund platform. Find out more about how the service works and take advantage of a 30 day FREE trial.