Just six out of 1,219 funds achieved top quartile returns over the three years to the end of the fourth quarter last year.
This is compared to 31 funds in the same period in 2021, according to Columbia Threadneedle Investments’ latest multi-manager survey.
Top six performing funds in three years to Q4 2022
IA Europe ex UK
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Invesco European Focus Fund
Liontrust European Dynamic Fund
IA Emerging Markets
Invesco Global Emerging Markets Fund
IA UK Smaller Companies
Liontrust UK Micro Cap Fund
TM Stonehage Fleming AIM Fund
IA Strategic Bond
Legal & General Dynamic Bond Fund
Source: Columbia Threadneedle Investments
The funds were from four different IA sectors, including IA Europe ex UK, IA Emerging Markets, IA UK Smaller Companies, and the IA Strategic Bond sector.
There was a marginal rise in the number of funds performing above the median, with 82 in Q4 compared to 60 in Q3.
The most consistent sector with funds performing above the median for three consecutive years was the IA UK Smaller Companies, with 15.2 per cent, followed by the IA Strategic Bond (sterling) sector with 11.1 per cent.
The least consistent was the IA Europe ex UK sector, with 4.4 per cent of funds achieving consistently above average returns for the three rolling 12-month periods.
Kelly Prior, investment manager in the multi-manager people team at Columbia Threadneedle Investments, said: “Unsurprisingly, consistency remains elusive in the rolling three-year periods to the end of 2022 as we move from low inflation, low interest rate world to something a little less familiar in the investment universe.”
With the Federal Reserve now closer to the end of its tightening cycle while the Bank of Japan is potentially just getting started, the fortunes of the relative currencies against sterling, which is sitting somewhere in the middle, is stark, she said.
“Often seen as the release valve when economies come under pressure, it is lining up to be an interesting 12 months for the world major currencies as the central banks of the world enact their quantitative tightening plans at different points to reflect the various drivers of inflation and how to combat them.
Volatility is normal and welcome, she added, as are the actions of the speculators who hasten to make predictions following central bank announcements.
"Active management will look through the noise and pick the better longer-term investment and return opportunities.”