Jupiter European, Threadneedle American and Schroder Tokyo are some of the international equity funds that have a long history and have generated handsome returns for their investors along the way. 
While investors should keep an eye on the short term, it is long-term results that ultimately matters and several funds have built up very long track records – albeit under more than one manager – while consistently staying at the upper end of their peer group.
In the first article of a new series, FE Trustnet will be digging deeper into the track records of longstanding funds in the Investment Association universe. To do this, we created a shortlist of all the funds with a track record of 20 years or longer, then worked out their decile rankings over the 61 rolling five-year periods between 30 June 1998 and 30 June 2018.
Over the following article we look at five funds from the IA Europe Excluding UK, IA North America, IA Asia Pacific Including Japan and IA Japan sectors that have achieved an average five-year decile ranking of 3.5 or better.
Jupiter European
First is the £5.8bn Jupiter European fund, which is headed up by FE Alpha Manager Alexander Darwall. Over the 61 rolling five-year periods we examined, its average decile ranking stands at an impressive 1.64; it has spent 41 of the periods in the first decile.
The fund, which holds the top FE Crown rating of five, was launched in August 1987 and has been managed by Darwall since 2001. Over the 20 years that this study covers, it made a 708.09 per cent total return – which is the highest of the 27 IA Europe ex UK funds with a long-enough track record.
Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
Jupiter European’s portfolio is built around European companies that have long-term growth potential regardless of the economic backdrop, typically focusing on quality-growth names that command pricing power while avoiding more cyclical areas.
The FE Invest team, which has the fund on its Approved List, said: “Darwall has built up an impressive track record in European equity investing, and this strategy and style of buying high-quality global companies has now weathered a number of market environments.
“It is also reassuring to see that value has been added, by successful company selection, over and above that which we would expect from just buying a general basket of these types of companies.”
Jupiter European has an ongoing charges figure (OCF) of 1.03 per cent.
BlackRock US Opportunities
Next up is the first of two IA North America funds: BlackRock US Opportunities, which is managed by David Zhao, Franco Tapia and Tony DeSpirito. The £110m fund launched in May 1987 but current team has only been at the helm since April 2017; previous managers include Tom Callan (September 2008 to April 2017), Neil Wagner (May 2006 to July 2008) and James Skinner (Jan 1996 to Nov 2002).
FE Analytics shows the fund’s rolling five-year decile ranking has averaged 3.26 during the two decades we examined. In cumulative terms, it has returned 580.08 per cent over the total period; this is the second highest from the 26 of its peers with a track record of more than 20 years.
The fund has spent 23 rolling five-year period in the sector’s top decile. However, the bulk of these occurred towards the start of the time frame we examined and it has been further down the performance rankings more recently; the most recent first decile period was between June 2006 and June 2011.
Performance of fund vs sector between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
BlackRock US Opportunities tends to invest more in value companies and has the aim of focusing on US small- and mid-cap stocks. However, the managers are not tied to this and the fund is currently overweight large-caps by a significant margin, while being underweight the other two segments.
Top holdings include annuities and life insurance firm Brighthouse Financial, CDW Corporation – which is a provider of IT solutions for business, government, education and healthcare – and financial services company Regions Financial Corporation.
BlackRock US Opportunities has an OCF of 0.89 per cent.
Threadneedle American
The second IA North America member on the shortlist is Nadia Grant’s £2.6bn Threadneedle American fund, which has an average rolling five-year decile ranking of 3.36. The fund only has two five-year periods when it was in the peer group’s top decile but plenty more when it was in the second or third deciles.
Threadneedle American was launched in February 1968 and Grant – who is head of US equities EMEA at Columbia Threadneedle Investments – has managed the portfolio since March 2018. Over its long history, it has been run by managers including Diane Sobin, Cormac Weldon and Andrew Holliman.
Between June 1998 and June 2018, the fund made a 442.49 per cent total return and is ranked sixth among its 26 peers. As the chart below shows, the fund has also outpaced its S&P 500 benchmark by a significant margin over this period.
Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
The process behind the fund looks for quality stocks that are showing improving business momentum but are cheap when compared with the broader market. ‘Quality companies’ are defined by the manager as those with earnings sustainability and capital management discipline; “This helps us avoid companies where management teams might make egotistic or empire-building investments that ultimately destroy value for the shareholder as measured by return on capital employed,” Columbia Threadneedle explained.
With a large-cap bias to the portfolio, the fund is overweight the information technology, healthcare and consumer discretionary sectors while its largest five individual holdings are Microsoft, Amazon, Google parent Alphabet, Apple and JPMorgan Chase.
Threadneedle American has a 0.83 per cent OCF.
Invesco Perpetual Pacific
Moving over to the IA Asia Pacific Including Japan sector and the only fund to have stood the test of time is Invesco Perpetual Pacific. Managed by Stuart Parks since August 2000 with Tony Roberts and William Lam joining him in 2013, the £336m fund has an average rolling five-year decile ranking of 3.03.
Parks is head of Asian equities at Invesco Perpetual and has more than 33 years of investment experience while Lam has 17 years’ experience.
The fund, which launched in May 1985, has been in the first decile in 14 of the five-year periods we looked at – with several of these occurring in the more recent past. Its cumulative return between June 1998 and June 2018 was 723.15 per cent, the best of the five-strong peer group.
Performance of fund vs sector between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
The process used by the team is valuation-driven, looking for companies whose share prices are substantially below the managers’ estimate of fair value. The philosophy underpinning this revolves around the belief that a company’s share price will reflect its fair or intrinsic value over the long term but that the market will often get this wrong in the short term.
In its latest update, the team wrote: “In terms of valuations, Asian equity markets are trading at levels above their long-term averages, but we do not believe they are at overextended levels and continue to compare favourably with world averages. Earnings growth in Asia is underpinned by a number of factors such as: robust domestic consumption in China, supply side discipline, an improving global economic outlook and a low interest rate environment globally.”
Invesco Perpetual Pacific has an OCF of 0.96 per cent.
Schroder Tokyo
The final fund to appear on the shortlist is Andrew Rose’s £2.7bn Schroder Tokyo fund, which has an average decile ranking over rolling five-year periods of 3.41. Only two of these periods have been in the first decile but it has tended to outperform its average peer more often than not.
Schroder Tokyo launched in March 1989 with Denis Clough at the helm. Clough ran the fund until March 2004 after which it was taken over by Rose; these have been the only two named managers on the portfolio.
The fund’s 306.64 per cent total return between June 1998 and June 2018 is the sixth highest of the 21 IA Japan funds with a sufficient track record. Moreover, it is around 100 percentage points higher than the gain in the Topix index.
Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018
Source: FE Analytics
Square Mile Investment Consulting & Research, which gives the fund an ‘A’ rating, said: “With Andrew Rose having been at the helm for over 10 years, this fund benefits from one of the most experienced Japanese equity managers in the industry. He is ably assisted by a wellresourced team of dedicated analysts, many of whom he recruited during his time as head of Japanese equity research.
“The fund is a core Japanese equities proposition that plays to the strengths of the manager and his supporting team. It intends for stock research to be the primary driver of returns but within this there is some consideration also given to the bigger picture. Overall, the portfolio is well-diversified and, given the approach, it exhibits a slight bias to value factors. We would view this fund as a very solid and wholly viable option for exposure to the asset class.”
Schroder Tokyo has a 0.91 per cent OCF.