Review of 2010: The year’s most persuasive funds

29 December 2010 | By Nick Rice

Oddly, despite the eurozone debt crisis, Europe ex UK provided more attractive franchises than any other sector.

To put together its list, Fund Strategy picked funds which had delivered both top-decile returns against their peer groups and top-decile returns adjusted for volatility. (article continues below)

Fund Strategy adhered mainly to the Investment Management Association (IMA) sectors, but split them into meaningful sub-sectors where appropriate, if the IMA sector contained strategies with highly differing objectives.

Of the 2,171 funds on Morningstar’s IMA database, only about 5% met Fund Strategy’s top-decile criteria.

However, top-decile returns and volatility-adjusted returns over one year are of little use if funds have not proved they can sustain them over bull and bear markets.

Fund Strategy therefore assessed whether these 5% of funds had delivered top-decile returns and risk-adjusted returns over the three years prior to the start of this year.

That period witnessed roughly18 months of rallies and 18 months of dips, giving a testing period over which to judge a fund’s consistency.

Only 15 funds met all the top-decile criteria. They are listed as follows, alongside their sector:-

Aberdeen Emerging Markets (in the Global Emerging Markets sector)

BlackRock European Dynamic (Europe ex UK)

Digital Stars Europe ex UK (Europe ex UK)

First State Global Emerging Markets (Global Emerging Markets)

Fleming Family & Partners European All Cap Equity (Europe ex UK)

Henderson Cash (Money Market)

Jupiter European (Europe ex UK)

Legal & General UK Alpha (UK All Companies)

Liontrust Special Situations (UK All Companies)

Marlborough Special Situations (UK Smaller Companies)

McInroy & Wood Balanced (Balanced Managed)

McInroy & Wood Income (Balanced Managed)

Rensburg UK Mid-Cap Growth (in the mid cap subset of UK All Companies)

Standard Life Trust Managers UK Inflation-Linked Bond (UK Index-Linked Gilts)

SVM All Europe SRI (Europe including UK)

The results not only encompassed well-known franchises, such as the emerging market teams at Aberdeen and First State, the European teams at BlackRock and Jupiter, the British equities teams at Legal & General and Rensburg, the fixed income teams at Henderson and Standard Life and Giles Hargreave on the Marlborough Special Situations fund.

They also showed encouraging performance at companies like SVM, a number of whose investments had been hit by the financial crisis; at Liontrust, which has posted losses and outflows since the resignation of two of its key fund managers and the departure of its chief executive; at J Chahine Capital, a French quant house almost unknown in the UK, which runs the Digital Stars fund; at Fleming Family & Partners, a family office with a nascent retail presence; at McInroy & Wood, a quiet Scottish-based asset manager.

Commentators have often predicted the British asset management industry will consolidate into a number of larger players, some of whom have featured highly persuasive products this year.

But good news emanating from some of the smaller players indicates the entire industry may not be destined to flow in that direction.

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