Fund Management Equity Index 2020

1. Consistency demonstrates skill, not luck
With seven out of last year’s best ten groups remaining at the top and, even more impressively, two of these companies having been in the top ten in each of the past six annual surveys, the Fund Management Index demonstrates beyond doubt that consistent outperformance of active equity fund managers is not a myth: outperforming for a decade is a result of pure skill.

2. Fund research is crucial
The huge difference in performance between the best and worst groups also demonstrates that researching fund picks for a portfolio is crucial. The average fund’s outperformance from the top group, Morgan Stanley, was 74%* higher than the average fund’s results from the bottom group.

3. Size doesn’t matter, but focus does
The index shows that size really doesn’t matter. The top ten groups were a mix of three smaller equity franchises and seven larger ones. However, the best companies have a focus on investment management. Companies that have a wider overall remit, like banking organisations, continued to disappoint at the bottom end of the list.

Fund group highlights

There were 15 newcomers to the table this year – perhaps an indication of the growing choice for investors in the UK. Wellington was the standout newcomer, debuting in the top 10 at number four. Other strong debutants included Nomura (15), Brown Advisory (16), Neuberger Berman (19) and Quilter (24).

The biggest climbers this year (excluding the newcomers) were Unicorn (+31 places), Legg Mason Martin Currie (+26), Allianz (+18), SVM (+17) and GAM (+16). Investment boutique Unicorn Asset Management is best known for its skill in managing funds investing in UK small and mid-cap companies, although it also has a presence in the VCT market. Its UK Growth fund has a particularly strong 2019. Legg Mason Martin Currie has also seen a strong bounce in performance, aided by its Emerging Markets and US Unconstrained funds – it will be interesting to see how the acquisition by Franklin Templeton impacts the fund range.

A strong year for equities in 2019 has resulted in five fund groups now having each of their qualifying funds outperforming over the past five years. The list is spearheaded by Marlborough Fund Managers with a total of nine outperforming funds, followed by Hermes and Wellington (both seven), SVM (five) and Unicorn (four).

The biggest fallers were Stewart Investors (-63 places), Miton (-43), JO Hambro Capital Management (-39), Schroders (-26) and Invesco (-25). Stewart Investors’ investment style is generally less risky than that of other funds investing in the region, and the team tends to underperform in strongly rising markets (which we experienced in 2019) and outperform in falling markets (which we experienced at the end of 2018). This makes their risk-adjusted performance stronger. JOHCM, Schroders and Invesco suffered due to the value-style of a number of their funds remaining out of favour.

Top five equity fund groups

We take a look at the top five fund houses in a bit more detail. Percentage figures show the average fund’s five-year outperformance for each fund group.

Morgan Stanley: 44.58% average outperformance

Morgan Stanley has managed to retain its position at the top of the index for the third year in a row. The group has seen five of its six eligible funds markedly outperform, with its US and global offerings leading the way. The Morgan Stanley Global Opportunity fund was the stand out product once again, returning more than 170%* over the five-year period.

Baillie Gifford: 31.71% average outperformance

Ever-present in the top 10, Baillie Gifford continues to underscore its strength in the active management industry with 14 of its 15 funds outperforming. What makes the firm stand out is this performance is attributable to various funds in different global markets. Once again, the American fund came out as its best performer, returning more than 156.9%* over five years.

Man GLG: 24.09% average outperformance

Man GLG completes an unchanged top three in the list from 2019. Three of its four fund outperformed, with its Continental European Growth and UK Income funds doing particularly well.

Wellington: 24.01% outperformance

Wellington is the newcomer to the top five, but it has strong credentials with all seven of its eligible funds outperforming. The firm’s Global Quality Growth Strategy has returned 121.91% over five years*.

T. Rowe Price: 22.67% outperformance

T. Rowe Price has consistently proven its ability as a leading active management provider in the UK. Like Bailie Gifford, the firm has always been in the top 10 of the index and has continued that trend this year with 13 of its 15 funds outperforming. The firm’s Global Focused Growth Equity, US Large Cap Growth Equity and US Blue Chip Equity have all performed well.

• Fund Management Equity Index 2019
• Fund Management Equity Index 2018
• Fund Management Equity Index 2017
• Fund Management Equity Index 2016
• Fund Management Bond Index 2015

Our annual Fund Management Equity Index looks at all actively managed equity funds recognised by the Investment Association, and compares them with their sector averages over a five-year time frame*.

Each asset manager’s funds are then grouped together to calculate its average fund performance. Companies must have a minimum of four qualifying funds to be included in the index.

Funds excluded from the index***

• Passive funds
• All non-equity funds
• Multi-manager funds
• Institutional funds
• Charity funds
• Funds with a track record of less than five years
• Funds not in an Investment Association (IA) sector
• Fund houses with fewer than four qualifying funds
• Some specialist funds in the IA Specialist sector which are difficult or impossible to compare including energy and agriculture funds

How we create the index

• We create a list of qualifying funds (see exclusion list above)
• We measure every qualifying fund’s over or underperformance after fees against its respective IA sector average over the past five years. (We use main units as defined by FE Analytics). For some specialist funds we create our own sub-sector or measure against an appropriate benchmark. IA Unclassified equity funds are also compared against an appropriate benchmark or peer group
• We group each asset manager’s funds together
• We work out each asset manager’s average fund’s over or underperformance
• We calculate what percentage of each group’s funds outperformed
• Some decisions taken in the production of this index are inevitably subjective and are based on the opinion of FundCalibre’s research team
• Every effort is taken to be as fair and accurate as possible
• All data is sourced from FE Analytics

Breaking down asset managers into fund groups

Where appropriate, we have broken down fund houses into different fund groups. Some asset managers operate independently but remain part of a wider group. For example, AXA Framlington and AXA Rosenberg are presented separately.

Weaknesses of the index

The index does not account for survivorship bias. Funds that have been closed down or that have been merged with other funds are not included in these results.

*All data used to compile the Fund Management Equity Index is taken from FE Analytics. All cumulative statistics % change bid to bid, net income reinvested, five years to 31/12/2019.

**Source: FE Analytics, total returns in sterling, calendar year 2019, MSCI World and MSCI ACWI Indexes.

***Please note FundCalibre has included or excluded funds in very few cases at its discretion, based on what it believes will provide the fairest comparison of each fund group’s performance over the time period.

These are purely statistical charts. While every effort has been made to ensure the accuracy of this information, FundCalibre takes no responsibility for any errors, omissions or inaccuracies therein.

Please note the Fund Management Equity Index does not constitute investment advice. If you are in any doubt as to the suitability of any investment you should seek professional advice. An appearance of any fund on this index is not an indication it should be bought, sold or switched.