The past three years may be part of what is now the longest bull market in history but this does not mean equity markets have behaved in the same way throughout this period.
In 2015 growth funds outperformed value funds, continuing the trend of much of the last decade, but in the second half of 2016 value-oriented funds made a comeback and started outperforming those with a growth bias.
While many expected this to continue for some time, last year saw the style bias flip back to growth while investors also enjoyed an unusual year of good returns paired with historically low volatility.
This year, markets have returned to ‘normality’ with volatility picking up and dislocation in markets becoming more apparent. One of the markets struggling is the FTSE All Share, which is down 1.34 per cent year-to-date (YTD).
With such a diverse selection of environments, outperforming in each calendar year has been difficult. Below, FE Trustnet looked at which IA UK All Companies funds have made a top quartile return in each of the last three calendar years and are on track to do the same in 2018.
Only four funds out of the 245 in the sector managed to achieve this: Liontrust Special Situations, MFM Bowland, MI Chelverton UK Equity Growth and Unicorn UK Growth.
Performance of funds since 2015
Source: FE Analytics
First up, we look at the fund that is on track to produce the best performance figure out of the four in 2018: MFM Bowland.
So far this year, the five FE Crown-rated fund is up 13.82 per cent and is the best-performer in the IA UK All Companies sector.
Its average annual returns across 2015, 2016 and 2017 was 22.32 per cent and the fund was a top quartile performer for each of these years amongst its peers.
However, despite being top quartile in 2016 and gaining 15.79 per cent, the fund returned less than the FTSE All Share over the year.
Since the beginning of 2015, the fund has cumulatively gained 107.63 per cent to the present day. Current manager Hargreave Hale took over in 2014 but the fund was launched back in 1999. It has a strong underweight to large caps and a big bias to small and micro caps.
Over the long-term, smaller companies tend to outperform their large-cap peers and over the period studied this has held true. The FTSE UK Small Cap index has returned 40.01 per cent versus the FTSE 100’s 29.14 per cent.
MFM Bowland also prefers the in-favour growth-style stocks over their value counterparts and has overweight allocations in growth sectors such as technology and underweight allocations in financials.
Since the beginning of 2015, the FTSE All Share Technology sector has returned 57.82 per cent, which makes it the second-best performing sector behind Oil & Gas.
Performance of FTSE All Share sectors since 2015
Source: FE Analytics
On the other hand, FTSE All Share Banks is the second-worst performing sector and has returned 12.03 per cent, although the financials sector will include other stocks such as insurance companies and asset managers.
The fund is £17.9m in size and has an ongoing charges figure (OCF) of 0.84 per cent.
The next fund to achieve a top quartile return in each of the past three years and is on track to do the same this year is MI Chelverton UK Equity Growth.
The five FE Crown-rated fund has the highest average performance across 2015, 2016 and 2017 of the four funds – 26.39 per cent – and is up 7.21 per cent so far this year. It has also beaten the FTSE All Share over each of the four individual years.
Cumulatively, the fund is the best-performer of the funds looked at today and has returned 115.75 per cent since the beginning of 2015.
As with the previous fund, MI Chelverton UK Equity Growth has a bias towards small caps and growth-style stocks, with industrials and technology representing nearly 45 per cent of the portfolio.
It has been managed by James Baker since its launch in 2014 with Edward Booth joining as co-manager at the end of last year. The fund has assets under management (AUM) in the region of £289m and an OCF of 0.95 per cent.
Liontrust Special Situations is the third fund on the list and has returned a top-quartile figure of 8.12 per cent YTD alongside top-quartile performance in 2015, 2016, and 2017.
Its average yearly performance across the three discrete years prior to 2018 is 15.47 per cent, while cumulatively it is up 66.44 per cent from 2015 to present day.
As with MFM Bowland, Liontrust Special Situations underperformed the FTSE All Share in 2016 but was up 15.77 per cent, 0.98 per cent less than the index.
The £3.9bn fund is run by FE Alpha Managers Julian Fosh and Anthony Cross and holds five FE Crowns.
Like the above funds, it has a growth bias and is overweight industrials and technology alongside an underweight in financials.
The multi-cap approach is another that makes the most of investing in small and mid caps, although it has a higher allocation to large caps than those above at 44.8 per cent.
Liontrust Special Situations has a yield of 1.82 per cent and an OCF of 0.87 per cent.
Annual performance of funds since 2015
Source: FE Analytics
Unicorn UK Growth is the fourth fund out of the 245 in the IA UK All Companies sector that has managed to post top-quartile returns in each of the past three years alongside a top-quartile YTD performance.
So far in 2018, the fund is up 2.63 and has averaged 20.18 per cent over the previous three years, beating the FTSE All Share index in all instances. Cumulatively, it is up 76.66 per cent over the total period studied.
Unicorn UK Growth has five FE Crowns and has been run by FE Alpha Manager Fraser Mackersie since 2011 with assistant manager Alex Game joining at the end of last year. The fund launched in 2001.
In a similar vein to the other funds looked at today, it is overweight technology and underweight financials, which can be partly responsible for the fund’s good performance.
The fund is £73m in size and has an OCF of 0.87 per cent.