Moneywise Fund Awards 2014

Published by Rachel Lacey on 09 December 2014.
Last updated on 10 December 2014

Whether you are looking to take advantage of the recently increased Isa allowance, putting money away for your kids or saving for retirement, choosing the right funds for you can be tough, with more than 2,000 to consider.

No investment fund is without risk - in October 2014 alone markets fell by more than 10% – but over the long term, with time to ride out the inevitable ups and downs of the stockmarket, your money will grow faster than it will in a cash savings account and will be better protected from the ravages of inflation.

But there is a big difference in the best and worst performing funds, so to help you make the right choice the Moneywise fund awards reveal the funds that have proved they can grow your money year in year out.

Whether you are looking for core UK holdings, a 'one-stop shop' mixed asset fund or something spicy to give your portfolio an adventurous edge, our winners, highly commended and commended funds are a great place to start your search for the right funds for the year ahead.

Find the best funds and invesmtent trusts using our powerful search engine


WINNER: Standard Life Investments UK Equity Unconstrained

With a value of £153.7 billion, UK All Companies is by far the biggest sector in the UK and more than twice as big as the global sector which comes in at number two. However rough a ride our own economy might be having, we as investors prefer our core holdings to be UK funds.

As a result there is no shortage of talent in the sector, and despite the ups and downs of the British economy, the best managers have proved that they can rise to the numerous challenges that have presented themselves in recent years. "This is a competitive sector and home to lots of talented managers," remarks Laith Khalaf, senior analyst at Hargreaves Lansdown.

For the second year in a row, our winner is Standard Life Investments UK Equity Unconstrained. In the past three years, this fund has returned more than 100% to investors and was top of the pile over three and seven years, only dropping to third place over five.

Gavin Haynes, managing director at Whitechurch Securities, says: "Ed Legget has been managing this fund since 2008 and has produced exceptional returns for investors." However, the performance of the fund comes at a price: thanks to Legget's preference for small and medium-sized companies and his aggressive investment style the fund is higher risk.

Tim Cockerill, investment director at Rowan Dartington, adds: "There's no doubting the ability of Ed Legget to generate very good returns, as his performance numbers show. However, it's a fund that thrives best when markets are buoyant and rising but when markets become bearish, volatility can increase so investors have to be prepared for this."

The runner-up in this category is Neptune UK Mid Cap, which is managed by Mark Martin. Patrick Connolly, certified financial planner at IFA Chase de Vere, says: "This fund has undoubtedly benefited from the strong performance of mid-cap stocks in general. However, credit must also go to the stockpicking abilities of the manager, who has done a better job of protecting gains than other mid-cap managers."


WINNER: Unicorn UK Income
HIGHLY COMMENDED: PFS Chelverton UK Equity Income

With the Bank of England base rate remaining at 0.5% and savings accounts offering paltry returns, it's hardly surprising that investors are relying on funds in this sector to generate an income from their capital. But it's not just income seekers who are flocking to the sector, as Connolly explains: "Investors are recognising the value of reinvesting dividends for capital growth, too."

Taking the crown in this highly competitive category is Unicorn UK Income. Cockerill says: "The IMA UK Equity Income sector is often criticised for consisting of funds that are very similar in their make-up. This can't be said of the Unicorn Income fund which is a small/medium cap- based fund and offers both a good income level and the potential for above average levels of growth in the long term. As such, its performance can be different to many within the sector and that's a good thing."

Haynes points out it's therefore a good diversifier for investors who also hold more mainstream UK Equity Income funds, which have a focus on larger blue-chip companies.

However, while this fund has performed very well it is important for investors to note this was under the former fund manager John McClure, who sadly passed away this year. Connolly adds: "While this award is an endorsement of his fantastic work, the challenge for Unicorn is to maintain the same level of performance in his absence."

Our runner-up in this category is last year's winner PFS Chelverton UK Equity Income. Haynes says: "Like the winner, this is an equity income fund that has performed well by investing in dividend-producing smaller companies. David Horner has built up a strong record of finding undervalued smaller companies and it has provided exceptional growth as well as an attractive income."


WINNER: Morgan Stanley Sterling Corporate Bond
HIGHLY COMMENDED: Rathbone Ethical Bond

Corporate bonds are often the mainstay of the cautious investor's portfolio – they offer better returns than cash but are considered to be less risky than stockmarket-linked investments. However, that position is being challenged as experts fear investors could suffer capital losses when interest rates do inevitably rise.

While their risk profile might be changing, IFAs say they still have a place. "Fixed interest still provides valuable diversification and protection alongside shares in a portfolio," argues Connolly.

So if you are sticking with bonds it's more important than ever that you make a wise choice. Our winner this year is the Morgan Stanley Sterling Corporate Bond fund.

Haynes says: "Although it is not one of the most familiar names for investing in corporate bonds Morgan Stanley has a strong fixed income team.

This has proved to be a defensively managed fund providing core exposure to a diversified portfolio of corporate bonds. The fund size remains relatively small compared to much of the peer group, so it can take advantage of opportunities that other larger funds cannot gain access."

Taking runner-up position is the Rathbone Ethical Bond. "Bryn Jones the longtime manager of this fund has delivered very consistent numbers and from a universe which is, because of its ethical screen, more constrained than most. The fund hasn't needed to trade down into sub-investment grade to achieve this either – most of the assets have been investment grade," says Cockerill.


WINNER: River and Mercantile UK Equity Smaller Companies
HIGHLY COMMENDED: Marlborough UK Micro-Cap Growth

It's not easy for investors making their first foray into this sector. Growth has been so impressive that a number of the best performing funds have had to close to new business to stop funds becoming too big and reducing the level of liquidity that is required when buying shares in smaller businesses. As a result, we had to exclude them from our awards. These include last year's winner and runner-up Fidelity UK Smaller Companies and Schroder UK Dynamic Smaller Companies (previously Cazenove UK Smaller Companies).

But for investors with an appetite for small-cap exposure our winner River and Mercantile UK Equity Smaller Companies is no consolation prize. Over three years it was the sector's top performer, beating the Fidelity and Schroder funds by a lengthy distance and providing investors with a return of more than 129%.

Haynes says: "Dan Hanbury [who managed the fund until September 2014] has been responsible for providing investors with some exceptional returns over the long term and the team has been strengthened by recruiting Philip Rodrigs, who is now the lead manager. The portfolio is focused on finding the best companies that are in the smallest 10% of the UK stockmarket."

Commenting on our runner-up in this category, Marlborough UK Micro-Cap Growth, Khalaf says: "The fund's outperformance of the FTSE Small Cap index has been exceptional. Smaller companies often fall out of favour with investors in times of market stress, such as 2008, but this fund has historically managed to shelter investors from the worst of these falls."


WINNER: FP Matterley Regular High Income
HIGHLY COMMENDED: Jupiter Distribution

Mixed investment funds offer investors instant diversification by investing across cash, fixed interest (including gilts and corporate bonds) and equities.

Funds in this sector keep risk to a minimum by capping equity exposure to 35%.

According to Connolly, our winner, FP Matterley Regular High Income 'does what it says on the tin'. "This is a diversified fund which does exactly what an investor would want from a fund in this sector; it produces consistent returns and provides a high degree of capital protection."

Commenting on the runner-up, Jupiter Distribution, Darius McDermott, managing director of Chelsea Financial Services, says: "This fund is a very consistent performer that seeks to offer investors a stream of enhanced income.

The fund's disciplined process helps to reduce the volatility of underlying capital."


WINNER: Kames Ethical Cautious Managed
HIGHLY COMMENDED: Invesco Perpetual Distribution

Moving up the risk spectrum, funds in this sector also include cash and fixed interest but equity exposure has to account for between 20-60% of total assets.

Our winner is an ethical fund - Kames Ethical Cautious Managed – which Haynes describes as "an excellent core holding for balanced investors". Cockerill adds it is a "straightforward fund that is well managed in the traditional way of cautious managed funds, with the
split between bonds and equities set at a max of 60/40 in favour of equities. It requires a skilled and disciplined approach to security selection, which managers Audrey Ryan and Iain Buckle have consistently achieved and all within the boundary of an ethical remit – outstanding".

Invesco Perpetual Distribution is runner-up. McDermott says: "This fund combines elements from the specialist bond and equity teams at Invesco. The combination of fixed income gurus Paul Causer and Paul Read, and the increasingly impressive Mark Barnett, who has stepped out of Neil Woodford's shadow, makes this a very compelling option."


WINNER: CIS Sustainable World
HIGHLY COMMENDED: Consistent Practical Investment

Upping the risk again, funds here are invested more heavily in equities, with exposure to stocks accounting for between 40% and 85% of total assets. Our winner here is CIS Sustainable World. "This is a growth- orientated fund with a strong track record. It invests predominantly in UK and US equities with, often, a significant weighting in healthcare and technology stocks," says Connolly.

By contrast, the runner-up, Consistent Practical Investment, invests predominantly in a range of investment trusts with global exposure. "The manager has performed well in the good times since he took over the fund. The challenge will be whether this can be maintained in a more challenging investment climate," Connolly adds.


HIGHLY COMMENDED: Old Mutual North American Equity

It's been a good year for investors in the US. According to Morningstar, in the 12 months to October the average fund was up by 15.5% – making it the top-performing sector over that period. "The US stockmarket is performing very strongly in line wight he recovery in the US economy," says Connolly.

"Companies are doing well, unemployment is down, the housing market is recovering and consumption and confidence are continuing to improve. Add to this cheaper energy costs and the US is in a pretty strong position and as a result investor sentiment is positive."

Our winner in this category is JPM US Select, which over three years has enjoyed growth in excess of 80%. Cockerill says: "The managers, of which there are three, run a diversified portfolio of more than 120 stocks which could dilute performance, but they take meaningfully active bets against the index to deliver performance. The results have been impressive especially against a market such as the US which has always been hard to beat."

Taking second place is Old Mutual North American Equity. "This is a very diversified fund which has been run by the same, well-regarded, team for the past decade. As long as this team stays together the future outlook for this fund remains pretty positive," remarks Connolly.


WINNER: Invesco Perpetual European Opportunities
HIGHLY COMMENDED: Invesco Perpetual European Equity Income

With problems in the eurozone continuing, it's been a challenging time for fund managers in this sector.

But that's not to say there aren't opportunities – the best stockpickers have been making some impressive returns. Taking pole position this year is Invesco Perpetual European Opportunities – the top performer over five years it has returned an impressive 85.9% to investors.

"Adrian Bignell has produced strong returns though a focused approach to stockpicking across European equity markets," says Haynes. "Bignell targets companies that he believes can deliver strong returns in the longer term, whether due to an effective business model, dominant market position, or a successful restructuring story."

Runner-up in this category is another Invesco fund, Invesco Perpetual European Equity Income. Cockerill says: "Stephanie Butcher has captured the improving fortune of many European stocks and has given investors very good returns over the past three years. To move ahead of other investors requires a combination of insight and courage, which she has clearly demonstrated."


WINNER: Newton Asian Income
HIGHLY COMMENDED: Schroder Asian Income

Many successful Asia Pacific funds have now become so big, managers are soft-closing funds to discourage new investors. In most cases, this involves charging an initial fee – of up to 4% in the case of First State funds. For this reason, we have had to exclude them from our awards.

Our winner, Newton Asian Income, provides a lower-risk way of accessing a higher risk region. Cockerill says: "Generating an income from Asian stocks has been a great way for income seekers to diversify their portfolios and with Newton's Asian Income fund investors get
a conservatively managed fund with a strict income criteria. These two factors suit an income fund in a region is riskier than where the traditional equity income funds invest. The fund offers a good balance between growth opportunities and income generation, and the results over the longer term bear this out."

The runner-up is Schroder Asian Income. Connolly says: "This fund invests in large, good quality Asian companies, has established a consistent track record and utilises the extensive research resources at Schroders."


WINNER: Schroder Global Healthcare
HIGHLY COMMENDED: Old Mutual Global Equity

Funds in this sector need to have 80% of their assets in international shares. But funds in this category don't necessarily provide instant diversification as the sector is also home to many thematic and specialist funds. Such funds can be perfect for adding a pinch of spice to your portfolio but may not necessarily be core holdings.

This year's winner, Schroder Global Healthcare is one such example. "Investing in healthcare can provide exposure to a defensive non-cyclical area of the stockmarket and be a good portfolio diversifier. With demographics of an ageing population across the globe, it remains a compelling structural growth story," says Haynes. But as with all specialist funds it is higher risk. As Connolly adds: "It is not a fund for the faint-hearted."

By contrast, the runner-up in this category – Old Mutual Global Equity – is closer to what investors might expect from this sector in that it offers an internationally diversified portfolio of equities, representing a range of industries. Haynes says: "The results have been impressive and the fund has provided investors with a good core holding to diversify their portfolio overseas."


WINNER: Lazard Emerging Markets
HIGHLY COMMENDED: Invesco Perpetual Emerging Countries

Funds in this sector invest in regions including Asia, Latin America, Africa and parts of Europe. Although its one of the highest performing sectors over 10 years it has struggled over recent years, with the average fund bringing in just 22% over five years.

But that's not to say investors have missed the boat, as Haynes explains: "We have seen emerging markets show a modest recovery in 2014 after a sustained period of underperformance, at current valuations, many of these markets look cheap relative to their longer-term averages, and at some of the cheapest multiples relative to developed markets since the global financial crisis. As such I believe this could provide a good entry point to build a long-term position."

McDermott describes our winning fund, Lazard Emerging Markets, as the "stand out in the sector". He adds: "Many leading global brands are now emerging market companies and the Lazard aim is to use its 230-strong team of investment analysts to identify the global brands of tomorrow in these developing regions. The managers take a bottom-up, stockpicking approach to achieve this and use market volatility created by macroeconomic concerns to time entry and exit opportunities."

This year's runner-up is Invesco Perpetual Emerging Countries. Connolly says: "This is quite a diversified fund but one where the fund manager isn't afraid to back his convictions which has led to it outperforming significantly in rising markets."

More About

Leave a comment