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The top funds from BMO’s most consistent sectors in Q3

10 October 2018

FE Trustnet looks at funds with the longest track records for sector-beating, rolling one-year returns from BMO Global Asset Management’s most consistent sectors.

By Rob Langston,

News editor, FE Trustnet

Funds in the IA Smaller Companies, IA Global Bonds and IA Global sectors delivered the most consistent sector-beating returns, according to the latest BMO Global Asset Management’s FundWatch survey.

There was a slight improvement in funds delivering above-average returns over the past three consecutive 12-month periods after a flattish third quarter for managers.

The survey revealed that 14.4 per cent of funds from the 12 main Investment Association sectors researched by BMO delivered above-average returns over the three previous 12-month periods to the last quarter-end, compared with 12.4 per cent in Q2.

  

Source: BMO Global Asset Management

Kelly Prior, investment manager in BMO Global Asset Management’s multi-manager team, said ongoing challenging conditions had seen the number of top quartile funds decline during Q3.

She said: “If we piece all the information together we can see how the continuation of low interest rates and absent inflation has created a vortex of goodwill for investments that benefit from the eerily stagnant conditions that we are currently experiencing.”

BMO’s quarterly FundWatch survey reviewed performance of funds across 12 of the major market sectors, filtering out those that are consistently above average in each of the past three 12-month periods to the last quarter-end.

"All 12 main IA sectors had funds meeting the less demanding above median consistency hurdle," the firm noted. "The most consistent sector on this measure was the IA UK Smaller Companies sector with 21.3 per cent of funds performing above median for three consecutive years. The IA Global Bond and IA Global sectors were the next best with 19.1 per cent and 18.7 per cent respectively achieving the target."

Below, FE Trustnet explores the most consistent performers from BMO's study by looking at the funds that have outperformed the sector average for the most consecutive 12-month periods to last quarter-end.

Of course, it must be kept in mind that past performance is no guide to future returns.

IA UK Smaller Companies

“The IA UK Smaller Companies sector secured the highest number of funds delivering top quartile and median performance, this is attributed to the sector not being as impacted by macro factors compared with the other sectors, allowing for superior stockpicking which generates alpha,” noted Prior.

According to FE Analytics, the fund with the most consistent track-record of outperforming the sector average over rolling 12-month periods to last quarter-end was the four FE Crown-rated BlackRock UK Smaller Companies fund.



The £525.6m strategy overseen by Roland Arnold has delivered above average rolling one-year returns since March 2014.

During that time, it has delivered 71.5 per cent total return compared with a gain of 56.27 per cent for the average IA UK Smaller Companies peer and a 34.54 per cent return for the Numis Smaller Companies + AIM Excluding Investment Companies index, as the chart below shows.

Performance of fund vs sector & benchmark since March 2014

 

Source: FE Analytics

The five FE Crown-rated TB Amati UK Smaller Companies has the next most consistent track record of outperforming the average IA UK Smaller Companies peer group, extending back to September 2014.

The £219.1m fund is co-managed by FE Alpha Manager Paul Jordan, Douglas LawsonDavid Stevenson, and Anna Wilson.

Since September 2014, the fund has delivered a total return of 116.95 per cent compared with a 66.76 per cent gain for the average peer and a 44.89 per cent rise for the Numis Smaller Companies + AIM Excluding Investment Companies index benchmark.

 

IA Global Bonds

Two funds dominate the next most consistent sector, IA Global Bonds, with rolling one-year returns to last quarter-end extending back to December 2008, Natixis Loomis Sayles Multi Sector Income and T. Rowe Price Global High Yield Bond.

The first fund – Natixis Loomis Sayles Multi Sector Income – is a five FE Crown-rated strategy team-managed by Dan Fuss, Elaine M. Stokes, Matthew J. Eagan, and Brian Kennedy.

The $1bn fund invests across a range of fixed income assets combining bottom-up bond-picking with top-down strategic macroeconomic views.

The second fund – the $1.5bn T. Rowe Price Global High Yield Bond – is co-managed by FE Alpha Manager Michael Della Vedova and Mark J. Vaselkiv. It invests in high yield corporate bonds from around the world, including emerging markets.

Since 31 December 2008, the T.Rowe Price fund has been the better performer delivering a 177.74 per cent total return compared with a 51.12 per cent gain for the average IA Global Bonds fund.

Meanwhile, the Natixis fund has generated a total return of 144.27 per cent over the same period.


 

IA Global

Finally, Merian Global Equity stands out in the IA Global equity sector for the rolling one-year outperformance of the sector average, with a record stretching back to year-end 2009.

The four FE Crown-rated fund is managed by Ian Heslop, Amadeo Alentorn, and Mike Servent and invests in a diversified portfolio of more than 400 holdings.

Its largest geographical exposure comes from the US – where 65 per cent of the portfolio is invested – followed by Europe, which accounts for a further 21.9 per cent.

The top holding in the portfolio is technology firm Apple, representing 2 per cent of the portfolio. Other top positions include online retailer Amazon.com, IT services company Microsoft, payment provider Mastercard and telecoms company Verizon.

Performance of fund vs sector & benchmark since 31 December 2009

 

Source: FE Analytics

Since 31 December 2009, the £1bn fund – recently rebranded from Old Mutual Global Investors – has delivered a total return of 283.2 per cent compared with a 176.84 per cent lift for the benchmark MSCI World index and a 130.37 per cent gain for the average IA Global sector peer, as the above chart shows.

Baillie Gifford Global Alpha Growth also stands out as a consistent performer delivering above-average rolling one-year returns since March 2010 (having been launched on 8 March 2010).

Indeed, BMO noted that a number of Baillie Gifford funds in equity sectors delivering consistent returns as the asset manager’s favoured growth style has dominated in recent years.

The four FE Crown-rated fund is managed by Charles Plowden, Maldolm MacColl, and FE Alpha Manager Spencer Adair and aims to outperform the MSCI becnhmark by at least 2 per cent per annum over rolling five-year periods.

Since 31 March 2010, the £4.6bn fund has delivered a total return of 193.33 per cent compared with a 180.52 per cent gain for tits above mentioned benchmark and a 113 per cent return for the average peer.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.