The differences in long-term returns between the best and worst performing equity funds are huge and variations in fund costs simply don’t explain them. Rather, they are the outcome of investment decisions taken. That’s why we believe it is vital to select the right fund managers carefully, identifying those with demonstrable track records of consistently adding value and who have strong future prospects of delivering superior returns.
Published on 15 Nov 20165 minute read
Written by Jason Hollands
To help, each year we produce a rundown of the top fund managers in the industry, based on performance, consistency and their overall experience. We believe this is a useful starting point when choosing funds that have the potential to deliver for you over the long term. Read on to discover how we identify these managers and to see the top 20 for 2016.
The conundrum for investors is that fund performance data is often only provided for the last five years and, in any case, this may not reflect the track record of the manager now in charge of a fund. After all, fund management is a competitive industry and inevitably managers will change jobs from time to time.
We’ve long believed that when considering ‘actively managed’ equity funds (those where a fund manager or team use their judgment over which companies to invest in), the right starting point is to scrutinise the career track record of the manager currently responsible for the fund, as far back as possible . The longer the record, the more confidence you can have that good results are down to genuine skill rather than luck – and consistency of performance is key. Plenty of star fund managers turn out to be shooting stars that burst on to the scene initially but falter over the long run.
The way we examine the career track record of fund managers is by using our own proprietary database. It combines the identifiable performance history of managers across multiple employers and funds that they have managed within their respective sectors.
There are of course many ways of looking at historic data, and to get the best insights we believe it is important to consider a combination. This way we can identify the managers who have both added value and have also been very consistent in delivering returns above those of the markets they operate in.
Using our database, we have analysed nearly 500 identifiable track records across a range of equity sectors to score managers on a number of factors. These include the average monthly performance above or below their market benchmark, both over their full career history in a sector and also over the last five years. This twin performance filter has been applied because some fund managers can start out well in their careers, but performance deteriorates as the assets they manage or their responsibilities grow over time or they burn out and lose their hunger for success. For the purposes of the table below, we only display average monthly performance over the manager’s full career history.
Consistency is also an important attribute, as it helps to distinguish between managers whose long-term records may have been favourably distorted by a ‘lucky’ streak and those with genuine skill. Therefore we have ranked managers on the percentage of individual months that they have delivered performance ahead of their benchmarks during their career.
We applied a final ranking based on the length of a manager’s track record as the more data, the more reliable the insights. The overall ranking was applied based on each of the above, with a half weighting given to career duration.
Should you back the funds currently run by the managers in the table? Not necessarily.
Past performance is not alone a reliable guide to future performance and there are a great number of considerations when choosing to invest in a fund. A fund may have a historically successful manager at the helm, but if the costs are exceptionally high or there is a lack of resource to support the manager, this could impact future prospects.
We believe this type of past performance analysis on fund managers is a useful starting point but not a complete formula for picking a fund. Our research process involves our team of research analysts meeting hundreds of fund managers each year to get deeper insights into what drives their investment approach. This includes understanding their investment styles, how they manage risk, the resources available to them, how aligned their interests are with those of fund investors and the extent to which fund size may impact the way they manage money.
You can find the overall top 20 fund managers below. If you have any questions about your own investments, please call us on 020 7189 2400, request a call back or email email@example.com
|Manager||Avg. Monthly outperformance (full career)||Consistency (% Months ahead)||Experience in sector||Current flagship fund in sector|
|1||Neil Woodford||0.30%||57%||27.9||CF Woodford Equity Income|
|2||Martin Cholwill||0.21||58||19.4||Royal London UK Equity Income|
|3||Anthony Cross/Julian Fosh||0.51||65||8.3||Liontrust Special Situations|
|4||Richard Pease||0.43||56||26.3||Crux European Special Situations|
|5||Chris Hutchinson||0.48||59||9.8||Unicorn Outstanding British Companies|
|6||Giles Hargreave||0.88||61||18.2||Marlborough Special Situations|
|7||Mark Barnett||0.30||58||13.7||Invesco Perpetual High Income|
|8||Stuart Parks||0.29||61||16.7||Invesco Perpetual Asian|
|9||Daniel Nickols||0.37||58||14.2||Old Mutual UK Smaller Companies|
|10||Nick Train||0.38||57||11.8||CF Lindsell Train UK Equity|
|11||David Gait||0.41||57||10.7||Stewart Investors Asia Pacific Leaders|
|12||Martin Lau||0.62||59||18.5||First State Greater China Growth|
|13||Ben Whitmore||0.31||58||14.8||Jupiter UK Special Situations|
|14||Martin Lau||0.38||57||13.1||First State Asia Focus|
|15||Thomas Moore||0.37||67||7.7||Standard Life UK Equity Income Unconstrained|
|16||Mark Slater||0.47||58||21.2||MFM Slater Growth|
|17||Dhananjay Phadnis||0.49||65||5.5||Fidelity Emerging Asia|
|18||James Thorne||0.29||61||11.4||Threadneedle UK Smaller Companies|
|19||Alister Hibbert||0.37||56||12.3||Blackrock European Dynamic|
|20||Stephen Harker||0.75||57||21.8||MAN GLG Japan Core Alpha|
All data to end September 2016