Grand National 2024: Using investment trends to find long-term winners (and maybe one for Saturday)

This weekend is one of the most popular in the sporting calendar as it marks the 176th running of the Grand National at Aintree, Liverpool. With 34 horses set to line-up, punters from up and down the land will be placing their bets on their respective horse(s) – from the bookies favourite all the way down to the rank outsider.

An estimated 500 to 600 million people watch the Grand National in over 140 countries, making it a major global event. In 2022, some 13 million people in the UK placed a bet on the race, with approximately £250m staked.

The race itself is all about stamina. Horses have to jump 30 fences and less than half of them usually make it to the end. In short, there are plenty of challenges to navigate, a bit like the investment world, with hairy fences on the Aintree course such as Becher’s Brook (the Global Financial Crisis), The Chair (Brexit) and the Canal Turn (Covid).

There are trends which normally help a punter find the winner (age, weight, fitness and reliability of jumping). But things have changed in recent years which have meant these trends are no longer as rigid as they once were (past performance in not a guide to future performance in the investment world).

We take a look at five UK-focused fund managers who’ve done the hard yards and have proven themselves over the long-term, regardless of the market backdrop (while also giving you five horses for the big one on Saturday).

 The bookies favourite: Artemis Income (Corach Rambler)

There is very little not to like about last year’s winner Corach Rambler. Not only did he sluice through the field in 2023, but he has also backed this up by coming third in the Gold Cup, the blue riband race at the Cheltenham festival. Although it should be noted that he has to carry a bit more weight to win the 2024 Grand National, he should still be there or thereabouts.

Artemis Income has been a stalwart of the UK equity income sector for over two decades. Managers Adrian Frost, Nick Shenton and Andy Marsh focus their analysis on a company’s cash flows and how this will drive future dividends. The stocks they will buy will have a strong franchise and offer a unique product or service.

One of the big winners in the fund is the top holding, private equity investment trust 3i Group (5.9%), with analytics company RELX Group (4.9%) and events, digital services and academic knowledge group Informa (4.4%) rounding off the top three*. The fund is up 36.3% over the past five years**, it also has a yield of 3.9%*.

The horse that fits the trends: Liontrust Special Situations (Mr. Incredible)

A lot of experts will tell you form goes out of the window when it comes to the Grand National – given the number of horses and the scope for things to go wrong. While there is an element of truth in this, there are also a number of trends to help you narrow the field. For example, horses which have not won over 3 miles previously or not run in the past 60 days, tend to struggle due to stamina concerns.

One investment trend worth considering for long-term investors is that small-caps tends to outperform larger companies, albeit with more volatility. This has been proven over many decades.

If you are looking for excellent long-term performance, you can’t really ignore a portfolio that has returned 103 per cent in the past decade, despite a significant amount of volatility within UK small-caps (Brexit etc)***. The Liontrust Special Situations fund has a very clearly-defined investment process, based on intangible strengths. Every stock in the portfolio must have: intellectual property; a strong distribution network or recurring revenues.

The wet weather lover: Schroder Recovery (Limerick Lace)

Ground is also a major factor in horse racing, particularly over longer distances. Some horses love the mud, others hate it. If the weather suits your horse – you could be in business.  It’s a bit like investment styles – like a value fund, many of which were being outshone by growth post the Global Financial Crisis, but have grown in popularity as interest rates have started to rise.

Schroders has one of the leading value teams in the UK – offering a range of products within this specific investment style. The Schroder Recovery fund aims to deliver attractive capital growth by investing in companies that have suffered a severe business or price setback, but where the managers believe long-term prospects are good. The fund has returned 23% to investors in the past three years****.

The solid each way offering: Janus Henderson Absolute Return (Vanillier)

There are also some horses which have proven themselves over the trip and are guaranteed to be in the picture again. These horses are like gold dust in a race like the Grand National as they offer a degree of protection as you know they can navigate uncertainty well. An each way bet on this horse to finish in the top five/six would be a good, sensible bet for those who are risk averse.

Janus Henderson Absolute Return is a long/short fund which tries to make a positive return in all market conditions. Two-thirds of the fund is in short-term tactical positions where the managers believe a surprise is imminent. The remaining third is in long-term core holdings. The fund may invest up to 40% outside the UK and has done this more and more in recent years. The fund has returned 19% in the past five years**.

The newcomer with all the tools: VT Downing Unique Opportunities (Meetingofthewaters)

We mentioned some changes to the race in recent years, among them is fewer runners (40 to 34) and smaller fences to protect the horses. This has changed the dynamic of the race and allowed classier, younger horses to be successful.

Launched in 2020, VT Downing Unique Opportunities is a multi-cap UK equity fund run by the highly-experienced Rosemary Banyard. With a total £37.9m assets under management, Rosemary looks for companies that have a sustained competitive advantage, with low debt and good management teams. The final portfolio will be highly concentrated at 25-40 names.

*Source: fund factsheet, 29 February 2024

**Source: FE fundinfo, total returns in pounds sterling, 9 April 2019 to 9 April 2024

***Source: FE Analytics, total returns in pounds sterling, 9 April 2014 to 9 April 2024

****Source: FE Analytics, total returns in pounds sterling, 9 April 2021 to 9 April 2024