To say the past 12 months have been tricky for investors would be an understatement. It has been increasingly difficult to find the right fund, especially in unstable markets and with underlying macro risks potentially having an effect – such as the US presidential election in November this year, or the upcoming EU referendum.
For the third year, we have set out to establish which were the best performing fund groups for the 12 months to 1 May, to find out who will be crowned Money Management’s Fund House of the Year 2016.
To reach a conclusion, we use data from FE, and all funds selected were retail funds available to UK investors which must sit in Investment Association (IA) sectors. All funds used were clean share classes. Funds were then organised by group, and space (according to IA stipulations) to calculate average returns.
All rankings were based on the average return for all funds from each group. And, as with previous years, all results and Tables should be looked at while keeping in mind that each group may have specialist areas and can not be directly comparable – nor should our findings be used for a recommendation.
There have been various market cycles in the past year, with some sectors performing much better than others, so one group which may outperform within – say – the UK space, may massively underperform in other areas.
Because research such as this can be biased towards smaller companies, we separate results into small-, mid- and large-sized companies, organised by the number of funds available, rather than funds under management. Small groups are those that have between one and nine funds, medium-sized groups have between 10 and 39 funds, while large groups are those with 40 or more funds.
Before looking in depth at the details, it is important to consider the past year for markets and funds. Out of all funds available (3,376), 2,188 – 65 per cent – saw either no return on an initial investment or lost money over the year. In terms of individual funds, the £642.2m Legg Mason IF Japan Equity fund saw the highest returns, recording 65.5 per cent growth over the year – a return of £1,655 based on an initial £1,000 investment. Interestingly, seven out of the top 10 funds were all gold-focused. Gold has always been a hotly debated topic, but this past year has seen strong returns.
Tables 1and 2 look into the top 10 small-, medium- and large-sized companies, but Table 2 is arranged by performance based on an initial £1,000 investment, and Table 3 by the average sector decile across all funds the group has available. Both Tables also show average discrete performance of 12 months to 1 May during 2013-14, 2014-15 and 2015-16.
At first glance, it can be seen that the small- and medium-sized companies have mostly outperformed their large counterparts. However, it is not fair to directly compare a group which has just one fund to one with 62. So while it may look like large companies have not done as well, that is not the case. Maintaining consistently strong performance across a larger range of funds is arguably more difficult. Although the number of groups that failed to return at all on average should definitely be kept in mind.