Sorting the Wheat from the Chaff - New research reveals the top equity fund managers

16 November 2016
 
  • Research scrutinised 497 fund manager career track records, across their various employers and funds within respective sectors to rank the equity managers with the greatest success in beating the markets and for consistency of outperformance
  • UK Equity Income investor Neil Woodford takes top spot; followed by Royal London’s Martin Cholwill with Liontrust duo Anthony Cross and Julian Fosh rounding up in third place. European equity veteran Richard Pease of Crux took further place followed by Unicorn’s Chris Hutchinson

New research from Tilney Bestinvest has identified the equity fund managers running funds available to retail investors with the strongest career track records for both adding value and consistency. The research looked at 497 identifiable track records of fund manager across a range of equity sectors where a minimum of five years of data was available. 

Jason Hollands, Managing Director of Tilney Bestinvest, commented: “The differences in return between the best and worst performing actively managed funds is enormous and simply cannot be explained by variations in fund costs but rather are the result of the investment decisions made. If you are going to invest with actively managed funds it is therefore vital to select the right managers and to always reassess the case for continuing to hold a fund when the manager or team changes as they inevitably do in a highly competitive industry.”

“The dilemma for investors is that fund performance data is typically provided for a period of just five years, which is barely an economic cycle and in any case such data may be of very limited relevance if it relates to the tenure of a manager who is no longer at the helm. We therefore believe it is vital to assess the relevant, full career track record of the current manager in a sector which may span multiple employers.”  

Tilney Bestinvest has developed its own proprietary database of fund manager career track records. In compiling the research, Tilney Bestinvest has scored managers on a number of factors. These include the average monthly excess performance over their market benchmark both over their full career history in a sector and also over the last five years. This twin performance filter was applied to recognise managers who have both performed well across their career and continued to do so in more recent times, as some fund managers can start out well but performance deteriorates as assets grow, they take on other responsibilities or burn out and lose their hunger for success.  Consistency is also an important attribute as it helps to distinguish between managers whose long term records may have been favourably distorted by a ‘lucky’ streak and genuine skill. Managers were therefore also ranked on the percentage of individual months that they have delivered performance ahead of their benchmark during their career. A final ranking was applied based on the length of a manager’s track record as the more data, the more reliable the insights.  An overall ranking was applied based on each of these, with a half weighting given to career duration.

Of course, key factors that can impact returns on a fund are the charges and expenses levied, as these erode returns. However, while these are important considerations when it comes to selecting a particular product they don’t help when assessing whether a fund manager’s investment decisions have added value. For the purposes of this exercise Tilney Bestinvest stripped out the impact of costs so that each manager’s record was comparable on a like-for-like basis. Where a manager has run multiple funds within the same sector at the same time, a blended track record across the funds was used.

“While analysing a manager’s historic track record is important, choosing a fund based solely on past performance is as inadvisable as driving a car staring into the rear view mirror alone. In considering a manager’s future prospects there are other factors to consider, such as whether they are running too much money and if capacity could impact their investment style as well as an assessment of whether the fund they are now managing has an attractive structure and reasonable costs. We therefore see this type of past performance analysis as a useful starting point rather than a complete formula for picking a fund,” said Hollands.

Full rankings are attached below for the top 50 managers. 

-ENDS-

 Important Information:

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers. Past performance is not a guide to future performance.

Smaller companies shares can be more volatile and less liquid than larger company shares, so smaller companies funds can carry more risk. Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could both increase or decrease. These investments therefore carry more risk. Funds may carry different levels of risk depending on the industry sector(s) in which they invest. You should ensure that you understand the nature of any fund before you invest in it. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing.

 

About Tilney

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