Meet the funds making money in each of the past 10 years

This article first appeared on Trustnet on 9 July 2024

Whenever we look at fund performance, it’s all too easy to become drawn to the portfolios boasting the highest returns. After all, we all like to see our investments rising in value.

It was the famous football commentator David Coleman who once said “goals pay the rent”, so you can see why the star performers often hog the headlines. But scratch beneath the surface and you can also see a plethora of funds delivering consistent returns, the bedrock for any investor reaching their long-term goals.

Which brings us to the funds which have never lost money in each of the past 10 calendar years (2014-2023)*. These portfolios are just as integral in providing both diversification and risk management to investors. I also want to put this into perspective. In the past decade we’ve had the likes of Brexit; mass geopolitical uncertainty across other parts of the world (think of President Trump); Covid; and the juxtaposition of low rates to where we currently sit in the world today.

So, we took a look at the calendar-year returns that our Elite Rated funds have achieved over the past decade, to the end of 2023, to see how they have fared. Our results found six funds with unblemished records of making money – and a few themes as well.

The first couple boasting a perfect record belong to the same asset manager in the shape of Polar Capital Biotechnology and Polar Capital Healthcare Opportunities. Both are subject to significant megatrends. Biotech companies are helping us live longer by bringing new drugs to market to tackle the likes of cancer, heart disease and obesity.

Healthcare is one of the biggest megatrends in the world and sits in the “defensive growth bucket”. Healthcare is almost style agnostic in nature and carries a low correlation with macroeconomic conditions. Most importantly, when compared with other sectors, demand for healthcare does not waver depending on the economy. As we know, biotech is one of a number of sub-themes within healthcare, with others such as implants, managed care, life sciences, hospital facilities and telemedicine.

Managed by David Pinniger, Polar Capital Biotechnology invests in companies of all sizes but with a bias towards smaller ones. Historically, the fund has had an overweight to European names, giving it a greater active share given the US-focused benchmark. Polar Capital Healthcare Opportunities has a similar bias, with around 30% in larger companies and the rest in small and mid-cap names. Manager Gareth Powell looks at the impact of new products, specialist markets, potential M&A activity, innovative technologies, and geographical or sector anomalies on the healthcare sector.

Read more: Investing in the golden age of healthcare innovation

Global and dividend-paying funds complete the list of consistent performers

The list also has two global equity income funds in the shape of the Guinness Global Equity Income and Fidelity Global Dividend. Managed by Matthew Page and Dr. Ian Mortimer, the Guinness portfolio typically consists of around 35 equally-weighted stocks, which the managers aim to hold for three to five years. They focus on how well, and how consistently, a company can use money to generate returns. The managers focus on first choosing the right companies – rather than filtering by dividend yield – as it gives them a greater chance of finding hidden gems in the market. They look for growing, rather than high, income and the equally-weighted portfolio also sets the fund apart from many of its peers.

Fidelity Global Dividend manager Dan Roberts looks for companies with understandable business models and predictable, resilient returns, and is happy to pay a fair price for a good company. The criteria for selecting companies falls mainly into two buckets. The first is valuation support, with Dan wanting to make sure he does not overpay for stocks – regardless of how good they look – as he does not want to dilute returns. The second is the quality of the franchise.

The third dividend payer is Fidelity Asian Dividend. Manager Jochen Breuer’s fund pays a decent yield of around 30-40% more than the wider market, but also offers the opportunity for capital and dividend growth. While the portfolio favours high-quality companies, Jochen will not invest in them at any price and his value-aware mindset, coupled with the yield target, gives the fund a value tilt.

JOHCM Global Opportunities has historically been amongst the least volatile in the IA Global sector. Manager Ben Leyland has a strong bias towards larger and medium-sized multi-national businesses in his portfolio, which typically holds 30-40 stocks. The philosophy of this fund is ‘heads we win, tails we don’t lose too much’. The fund also can, and will, hold large cash positions if valuations are unattractive.

Nine out of 10 is incredibly good!

A further 19 Elite Rated funds and trusts only lost money during one calendar year out of the last 10, many of which incurred their only loss during the volatile rate rising environment we saw in 2022.

Funds of note here included Fidelity Global Technology and AXA Framlington Global Technology, which both produced top quartile performance in the IA Technology & Technology Innovation sector in nine and eight of the past 10 calendar years respectively.

Scottish Mortgage was the only Elite Rated Investment Trust to make the list, with nine years of positive returns offset by a 45.7% loss in 2022. Another to mention is Ninety One Diversified Income, which sits in the IA Mixed Investment 0-35% Shares sector. Managed by John Stopford and Jason Borbora Sheen, the fund targets a yield of around 4% annually, distributed monthly, by principally investing in fixed income securities and some equity positions. The portfolio also uses hedging for downside protection, with the fund targeting half the volatility of UK equities. The portfolio has produced solid, single-digit returns most years since launch.

*Source: FE Analytics, figures from 1 January 2014 to 31 December 2023