Some 36 funds from the 4,000 or so in the Investment Association universe have posted top-decile numbers for both returns and volatility in the fragile conditions of 2019 so far, research by FE Trustnet shows.
Markets have been far from easy to navigate this year, with its opening months seeing strong gains across the board before an apparent escalation in the trade war between the US and China ushered in some renewed turbulence.
Given this, FE Trustnet looked across the Investment Association universe to find out which funds are currently in their peer groups’ top deciles for both total returns and annualised volatility.
Performance of fund vs sector and index over 2019
Source: FE Analytics
Of the 36 funds that made it onto the shortlist, the highest total return came from Brown Advisory US Smaller Companies. This £322.4m fund, which resides in the IA North American Smaller Companies sector, has made 24.62 per cent over the year to date with annualised volatility of 12.04 per cent.
Managed by Christopher A Berrier and George Sakellaris, the fund focuses on high-quality businesses with sound management teams and competitive advantages that the managers believe can produce above-average growth rate over a full market cycle.
The process behind the portfolio makes use of an investment network of venture capital, private equity and firm relationships, which gives the managers argue gives them “a potential informational advantage”.
Over longer time frames, Brown Advisory US Smaller Companies has also performed strongly and sits in the peer group’s top quartile over one, three, five and 10 years. It has made 463.47 per cent over the past decade, outperforming both its average peer (337.57 per cent) and its Russell 2000 Growth benchmark (361.69 per cent).
The second highest total return on the list has come from Craig Bonthron and Neil Goddin’s £82.2m Kames Global Sustainable Equity fund, which is up 23.54 per cent year to date with annualised volatility of 5.07 per cent. It only launched in 2016 but is currently top quartile over one and three years.
The FE Invest team, which has the fund on its Approved List, said: “This fund launched in 2016 so the track record is relatively short; however, Bonthron and Goddin have run the unconstrained Kames Global Equity fund for over three years and Kames have run ethical portfolios for much longer.
“We particularly like that the fund takes a different view on emerging markets than other responsible funds, in that the team doesn’t shy away from these regions and actively looks for opportunities.”
In third place is Threadneedle Pan European Focus with a 22.8 per cent total return and annualised volatility of 3.51 per cent. This fund, which is managed by Frederic Jeanmaire, is another with a strong long-term track record and is top quartile in the IA Europe Including UK sector over five and 10 years.
Source: FE Analytics
The list above also includes one of the industry’s biggest names: the £17.5bn Fundsmith Equity fund. This fund, which is headed up by FE Alpha Manager Terry Smith, has made 19.35 per cent over 2019 to date while its annualised volatility stands at just 5.86 per cent.
Smith takes a quality-growth approach to investing, favouring high quality businesses that can sustain a high return on operating capital employed. This approach has paid off in 2019 (as in recent years) and has significantly outperformed the value style.
Fundsmith Equity has also consistently been one of the strongest performers in the IA Global sector since its launch in November 2010. Over this period it has made 336.08 per cent, which is the peer group’s highest return and significantly ahead of the MSCI World’s 153.27 per cent gain.
Another notable IA Global fund to deliver top-decile returns and volatility over the year to date is Lindsell Train Global Equity. This £8bn fund is run by the FE Alpha Manager duo of Michael Lindsell and Nick Train, alongside James Bullock; this fund also takes a quality-growth approach and has benefitted from the strong bull run in these stocks that has taken place as the market recovered from the financial crisis.
LF Lindsell Train UK Equity, which is run by Train, also made it onto the list with a 17.9 per cent total return putting it in the IA UK All Companies sector’s top decile in 2019 so far. Its annualised volatility has been 7.7 per cent.
The £6.8bn strategy’s quality-growth approach, which rarely sees new stocks enter the portfolio or holdings being sold out of, has led to strong returns for investors over the long run.
The FE Invest team, which has included the fund on its Approved List, said: “Achieving this impressive track record with the low portfolio turnover highlights his stock picking skills. We like the consistency of his strategy, which will not vary depending on the economic conditions.”
Performance of fund vs sector and index since launch
Source: FE Analytics
A number of other funds that are featured on the list above have assets under management in excess of £1bn.
Paul Doyle’s £1.1bn Threadneedle European fund has made 15.44 per cent this year with annualised volatility of 7.04 per cent. It has a bias towards high-quality and growing companies that Doyle believes are under-valued by the market.
“We seek high-quality companies which we believe have a sustainable competitive advantage and robust business model as we look to uncover the best possible sources of alpha,” the manager explained.
The £2.8bn Vanguard Pacific ex-Japan Stock Index tracker has also turned in top-decile numbers for total returns and volatility this year, outperforming many of the active funds in the IA Asia Pacific Excluding Japan sector.
Two other trackers from this peer group have also made the list above: Pictet Pacific Ex Japan Index and Fidelity Index Pacific ex Japan.