Want to know which funds reached for the sky this year? We spotlight the biggest stars in our fabulous fund awards
An investment fund can be a fantastically profitable way to save for the long term. Whether you are putting away money for a rainy day, planning further ahead for your retirement or have your children or grandchildren’s futures in mind, your cash should grow faster than it would if kept in a savings account.
Investment funds offer an easy way to invest in the stock market. Savers’ money is pooled together in a portfolio of shares and run on their behalf by a fund manager. Not only is this cheaper than running your own investment portfolio, it spares amateurs the difficult decisions of choosing shares and deciding when to buy and sell.
Different funds will have different objectives, achieve different returns and take different levels of risk with their investors’ cash. Some will seek to grow their investors’ capital, while others place a greater focus on protecting it or on delivering income. Some will focus on certain companies or sectors while others invest in specific regions.
To make it easier for investors, funds are grouped into sectors according to where and how they invest, and performance data is readily available online. Nonetheless the choice for the inexperienced investor can be overwhelming.
Whatever your investing goal the Moneywise Fund Awards are a good place to start.
Covering the most popular sectors for investors, the awards are based on aggregated performance over three, five and seven years. Rather than highlighting flash-in-the-pan out-performance, our winners and runners-up have demonstrated that they can consistently deliver impressive returns.
UK All Companies
As its name suggests this is a large and broad sector – funds must invest 80% of their assets in the UK stock market and focus on growing investors’ capital – but that is often where their similarities end. This is why investors need to do their research and get to grips with the strategy of their chosen fund first.
Both our winner and our runner-up have, however, out-performed their peers in the sector with a similar approach.
Lindsell Train UK Equity, which takes the winner’s award, is up 42% over three years, compared to a sector average of 16%, while our runner-up, TB Evenlode Income, is up by 33% over the same period.
Chelsea Financial Services’ research director, Juliet Schooling Latter, says: “Both of these funds have done very well for a number of years. They both invest in quality companies, have low turnover, and have been skewed toward the larger dollar or overseas earners. We really like both – our only caveat being that if there is a Brexit deal and the pound rallies, they might suffer in the short term.”
She adds: “When it comes to the sector, UK equities are unloved right now – both by UK and overseas investors. Therefore, they are better value than other developed markets. If you are willing to sit through Brexit pain, over the long term it might prove a decent time to invest – but be prepared for a bumpy ride.”
Winner: Lindsell Train UK Equity
- Manager: Nick Train
- Ongoing charges: 0.65%
- Value of £1,000 invested five years ago: £1,960 (96%)
Highly commended: TB Evenlode Income
UK Equity Income
Equity income funds invest in companies that pay reliable dividends to investors – this makes them a popular choice for retired investors looking to generate income from their savings. However, they can also be a great choice for growth investors who reinvest dividends to boost returns. Again, different funds will have different strategies – some (including our runner-up) will also have an eye on capital growth in addition to income.
Our winning fund this year is Man GLG UK Income Professional, managed by Henry Dixon, while our runner-up is last year’s winner, MI Chelverton, run by David Horner and David Tyler.
Commenting on our winner, Dzmitry Lipski, investment analyst at interactive investor (Moneywise’s parent company) says: “The fund targets income above the FTSE All-Share index and some capital appreciation by investing primarily in UK equities and companies that derive a substantial part of their revenues overseas. The manager adopts a value-based investment approach and focuses on dividend growth as opposed to the absolute level of yield. This has resulted in a multi-size portfolio with a distinct bias toward small UK dividend payers, but the manager also has a scope to invest in a company’s bond, rather than its equity, if he feels there is more attractive capital upside and income potential.”
However, while the fund has undoubtedly performed well, Mr Lipski warns that investors need an appetite for risk.
“As the fund does not hold many of the names typically owned by larger dividend-focused funds, its returns will probably be more volatile than its competitors’. It could be seen as complementary to other, more well-known and index-aware funds.”
Commenting on our runner-up, Ms Schooling Latter adds: “The MI Chelverton fund is also multi-cap, but has a bias toward smaller companies. The manager of this fund has been good at finding dividend growers further down the market cap spectrum.”
Winner: Man GLG UK Income Professional
- Manager: Henry Dixon
- Ongoing charge: 0.9%
- Value of £1,000 invested five years ago: £1,710 (71%)
Highly commended: MI Chelverton UK Equity Income*
UK Smaller Companies
The returns of UK Smaller Companies are undoubtedly impressive. Over five years our winner, TM Cavendish AIM, is up by 128%, while our runner-up, Merian UK Smaller Companies Focus, is up by 119%.
However, with funds focusing on the smallest 10% of companies by market capitalisation it is a high-risk sector, with firms more likely to fail than better established larger caps.
However, Ms Schooling Latter says, if you’re brave, now could be a good time to invest. “As UK equities are unloved, this could prove to be a decent entry point for UK smaller companies – especially for very long-term investors. But again, they may need to stomach some difficult times ahead in the shorter term.”
She has been particularly impressed by our winner, managed by Paul Mumford, which invests in the Aim or alternative investment market – a sub-market of the London Stock Exchange that helps the very smallest companies raise capital. “The Cavendish Fund has been a top performer for many
years and it’s a testament to the manager’s stock-picking abilities because you really have to get it right in the AIM market.
“The index has returned next to nothing, so his active management has been superb.”
Commenting on our runner-up (and last year’s winner) Ms Schooling Latter adds: “Merian has an exceptionally good mid- and small-cap team and this fund has also been excellent for a number of years.
“The team are particularly good at identifying early growth opportunities that survive and do well.”
Winner: TM Cavendish AIM
- Managers: Paul Mumford and Nick Burchett
- Ongoing charge: 0.68%
- Value of £1,000 invested five years ago: £2,150 (115%)
Highly commended: Merian UK Smaller Companies Focus
Mixed Investment 20-60% Shares:
Funds in this sector are for more cautious investors with their stock market exposure restricted to between 20% and 60% of the fund. The remainder is invested in lower-risk asset classes such as fixed interest (including gilts and corporate bonds).
Taking the award for the second year in a row is Royal London Sustainable Diversified Trust, which as its name suggests, has an ethical mandate. Mr Lipski explains: “The fund, managed by Mike Fox, is a prime example of why investing for good does not result in sub-par performance.
“In fact, the fund consistently outperforms the average return of funds in the Investment Association’s Mixed Investment – 20-60% Shares sector. It currently ranks top for cumulative performance over one and three years and second over five years.”
He continues: “The fund’s investment policy prohibits investment in companies that cause significant environmental damage and those which derive a material proportion of business from countries where human rights are disregarded, or are involved in tobacco production, military applications, and products tested on animals, among other practices commonly deemed unethical.”
Coming in second place is AXA Global Distribution. Commenting on the fund Mr Lowcock says: “This fund invests in a balance of equities and bonds globally. The managers focus on major developed countries, and typically holds around 50-60% in shares with the remainder in index-linked bonds and cash.
“They use an in-house stock selection model, which considers the financial data of companies selecting those that look attractive relative to their industry peers.”
- Manager: Mike Fox
- Ongoing charge: 0.7%
- Value of £1,000 invested five years ago: £1,590 (59%)
Highly commended: AXA Global Distribution
Mixed investment 40-85% Shares:
Targeting investors with a greater appetite for risk is our second mixed asset category. This time stock market exposure is limited to a minimum of 40% and a maximum of 85%.
For the fourth consecutive year our winner is the Royal London Sustainable World Trust.
Mr Lowcock says: “This fund mainly has exposure to global equities, with some bonds, and looks to grow via a sustainability approach that has been employed in a disciplined manner over time.
“The fund is co-managed; Mike Fox, who looks for companies that deliver a net benefit to society in terms of the products and services they provide or that show leadership in environmental, social, and governance management on the equities side; while Richard Nelson looks for similar characteristics in bonds. He also makes sure secured bonds make up the core of the portfolio and then complements them with issuers that are currently out of favour but where he can see clear opportunities for a revaluation.”
Our runner-up is Liontrust Sustainable Future Managed. Ms Schooling Latter says: “The fund is run by the ex-Alliance Trust team, who are also very experienced. It’s been a consistently strong performer in the sector.” (Liontrust acquired Alliance Trust Investments in 2017).
Winner: Royal London Sustainable World*
- Managers: Mike Fox and Richard Nelson
- Ongoing charge: 0.77%
- Value of £1,000 invested five years ago: £1,890 (89%)
Highly commended: Liontrust Sustainable Future Managed
Strategic bond funds offer managers more flexibility as to where they invest than conventional corporate bond funds. This gives them greater potential to generate yield in challenging markets; the downside is they can be higher risk as a result.
Our winner for the second year in a row is Royal London Sterling Extra Yield Bond. Although the fund is higher risk, its performance has been consistently impressive.
Ms Schooling Latter is a big fan. “The Royal London fund has had extremely good risk-adjusted returns and we rate the team behind it very highly. They have proved themselves to be particularly adept at investing in unrated bonds – an area that others avoid. But, as they say, many are simply unrated because the company has not paid an agency to rate them – they are not necessarily any riskier. So, they research them thoroughly and have been able to select some great bonds.”
Taking the runner-up’s accolade is Man GLG Strategic Bond. Charles Younes, research manager at Financial Express, says: “Craig Veysey at Man GLG Strategic Bond has successfully transitioned his strategic bond fund from Sanlam to Man GLG, which acquired the portfolio in October 2018. During that transition, the process has remained intact with Veysey benefiting from a stronger quantitative and credit analysis support. The fund’s strategic asset allocation best explains the strong fund performance this year.”
- Manager: Eric Holt
- Ongoing charge: 0.49%
- Value of £1,000 invested five years ago: £1,440 (44%)
Highly commended: Man GLG Strategic Bond
“This sector aims to give investors access to shares listed on stock markets around the world,” explains Patrick Connolly, chartered financial planner at IFA Chase De Vere. “It means they can get a good level of diversification in just one fund. However, it’s a very big sector, with 321 funds, and they can differ hugely in terms of where and how they invest and the level of risk they take. Some are focused on specific geographical regions, some invest in passive funds, some adopt an ethical approach and others focus on specific areas like energy, healthcare or infrastructure.”
Our winner, Lindsell Train Global Equity, is a focused fund with a limited number of holdings and low turnover. Mr Connolly says: “This fund has an experienced and successful management team that includes the firm’s founders Michael Lindsell and Nick Train. It invests in a concentrated portfolio of ‘exceptional’ companies, focusing on businesses with sustainable business models, long-term durability, profit generation and established brands. It has done really well in rising stock markets, but the investment approach should also provide some protection in more difficult times.”
Our runner-up is Fundsmith Equity. “The fund manager, Terry Smith, only invests in good quality large companies that have repeatable earnings, he doesn’t overpay and then he does nothing. He doesn’t try to time markets, trade frequently or panic, and there are many sectors he avoids entirely,” Mr Connolly explains. “He has a preference for international businesses and market leaders, looking to buy companies that are today’s rather than tomorrow’s winners. The result is a fund that has been incredibly successful.”
Winner: Lindsell Train Global Equity*
- Manager: Michael Lindsell and Nick Train
- Ongoing charge: 0.5%
- Value of £1,000 invested five years ago: £2,630 (163%)
Highly commended: Fundsmith Equity*
Global emerging markets
“This sector covers emerging markets wherever they are in the world and includes funds that target one country or area, as well as broader global emerging markets funds,” says Adrian Lowcock, head of personal investing at Willis Owen. “Large-cap company funds are compared with smaller companies funds as well. This means that although emerging markets are risky there is a difference in risk even within the sector.”
Demonstrating its expertise in this area, two Baillie Gifford funds take the winner and runner-up positions for the second consecutive year.
Commenting on our winner, Baillie Gifford Emerging Markets Growth, Mr Lowcock says: “The fund invests in emerging markets worldwide and in any economic sectors within each of these markets. The primary focus is Eastern Europe, Latin America and the Asia Pacific region. The approach is team-based, with a sub-manager responsible for stock selection in each area. Stocks are selected on a bottom-up basis, picking companies that will post above average growth in earnings over the medium to long term.”
Of our runner-up, Baillie Gifford Emerging Markets Leading Companies, Ryan Hughes, head
of active portfolios at AJ Bell, says: “There is little to choose between this fund and the winner as they are managed by the same team with an almost identical strategy.
“The key difference is this fund is a little more concentrated and more focused towards larger companies.”
- Managers: Mike Gush and Richard Sneller
- Ongoing charge: 0.78%
- Value of £1,000 invested five years ago: £1,760 (76%)
Highly commended: Baillie Gifford Emerging Markets Leading Companies
Asia Pacific Excluding Japan
Funds in this sector can invest in a range of economies from developed countries like Singapore, Hong Kong as well as more emerging economies including China, India, Thailand, Malaysia and the Philippines.
Mr Connolly says: “Asia Pacific has great long-term growth potential. The sector benefits from strong global growth with high levels of exports, and the demographics are positive with an emerging middle class, meaning there should be less long-term reliance on overseas markets in the future.”
He adds: “Asia tends to perform well when China, which is the economic powerhouse in the region, does well. However, the region can suffer from geopolitical risks, and an escalation of the US-China trade war would be bad news. Investors also need to be careful with their allocation to Asia Pacific if they also hold emerging markets investments, especially with China being dominant in both sectors.”
Our winner is JPM Asia Growth. “The JPM Asia Growth fund has performed strongly since managers Mark Davids and Joanna Kwok took control in 2015 as their focus on high quality growth companies has been richly rewarded,” explains Mr Hughes. “The fund is pretty concentrated with big positions in some of Asia’s largest companies, such as Samsung and Alibaba, while there are large country overweights to India and Indonesia.”
Coming in second place is Fidelity Emerging Asia. Mr Hughes says: “The Fidelity Emerging Asia fund is a small fund but has a big pedigree with a strong team backing fund manager Dhananjay Phadnis. The fund is happy to look away from the index with positions in companies that are not part of the benchmark alongside some more familiar and established names. With significant resources in the region, the Asian team at Fidelity is one of the strongest around.”
Winner: JPM Asia Growth
- Managers: Mark Davids and Joanna Kwok
- Ongoing charge: 0.9%
- Value of £1,000 invested five years ago: £2,010 (101%)
Highly commended: Fidelity Emerging Asia
“Europe faces many challenges, including the UK’s withdrawal from the EU and sluggish economic growth,” says Mr Connolly. “There may also be more political upheaval if nationalist parties gain traction, and the European Central Bank has fallen a long way short of solving all the economic issues in the Eurozone.
“However, Europe has many good quality companies, which earn about 50% of their revenue from outside the Eurozone, so while the fortunes of European economies are important, some companies can still do well even if Europe as a whole doesn’t.”
Our winner this year is Jupiter European. Mr Connolly says: “Previous fund manager Alexander Darwall ran this fund from 2001 until September 2019 and built up an impressive long-term track record. His departure has led to some investors pulling out, although his replacements, Mark Heslop and Mark Nichols, who joined from Threadneedle, are credible alternatives and bring with them experience of managing mainstream and smaller company European equities. While the fund will be managed differently going forwards, it should still have good long-term prospects.”
Coming in second place is BlackRock European Dynamic. “The fund has long been a consistent performer with Alister Hibbert at the helm for over a decade,” says Mr Hughes. “Hibbert operates on an unconstrained basis with a fairly concentrated portfolio and currently has a large allocation to the larger companies in the benchmark, although this can change.”
Winner: Jupiter European
- Managers: Mark Heslop and Mark Nichols
- Ongoing charge: 1.02%
- Value of £1,000 invested five years ago: £2,070 (107%)
Highly commended: BlackRock European Dynamic
“The US market is too big and too important to ignore and so most investors should have some exposure,” says Mr Connolly. “It has the largest stock market and economy in the world and is home to many of the most successful and innovative companies, including Apple, Microsoft and Amazon. US shares have performed really well over the past decade, but there are risks including a possible escalation of the trade war with China, concerns about a potential US recession – and who knows what Donald Trump will do next?”
Funds from T Rowe Price take the winner and runner-up position.Although it’s not a household name in the UK, Mr Hughes points out it is in fact one of the world’s biggest fund managers, running more than £1 trillion of investors’ cash.
Our winner is the T Rowe Price US Large Cap Growth Equity.
Mr Connolly says: “This fund is run from Baltimore and benefits from huge investment resources, with T Rowe Price having 70 US equity analysts in Baltimore alone. As they are major investors, often being one of the biggest holders of individual stocks, they have great access to companies, which helps them to make informed decisions, and this has resulted in a strong performance record.”
For the second consecutive year T Rowe Price US Blue Chip Equity is runner-up. Mr Lowcock says: “Larry Puglia has been at the helm of this fund since the launch in 1993 and has delivered consistent returns through several market cycles. T Rowe Price is a long-established US firm with extensive resources for coverage of the US, and Puglia has a large team of sector specialists to support him. The fund’s strategy is to focus on companies with above average and sustainable growth prospects. The portfolio is well diversified, with over 100 holdings, but Puglia will take large individual positions in companies he has the greatest conviction in.”
- Manager: Taymour Tamaddon
- Ongoing charge: 0.57%
- Value of £1,000 invested five years ago: £2,480 (148%)
Highly commended: T Rowe Price US Blue Chip Equity
Ethical investing has become hugely important in recent years and the appearance of several ethical funds in these awards outside of this category is proof it needn’t compromise returns.
Nonetheless it’s a diverse category, including both traditional ‘ethical’ funds as well as those with a focus on the environment and sustainability. As Mr Lowcock says: “There are various ways to approach investing ethically and what is ethical is different for each of us. You are unlikely to find one fund that matches your views perfectly so it’s about doing your research and deciding what approach to take. Do you want to avoid unethical companies or invest for positive change?”
Our winners are purely decided on performance so investors will need to do their research fully to check whether they share the same ethical principles.
Taking the award this year is last year’s runner-up, Janus Henderson Global Sustainable Equity. Mr Connolly says: “This is Janus Henderson’s flagship ethical fund and invests in companies that have a positive social or environmental impact. This includes those that can benefit from the challenges posed by climate change, population growth, resource constraints and ageing populations. The fund manager believes that sustainable companies can add real shareholder value. He aims to outperform non-ethical global funds and he is doing a really good job of achieving this, as the fund is one of the best performers in its sector.”
Our runner-up is last year’s winner. BMO Responsible Global Equity. Commenting on the fund, Mr Hughes says: “The fund builds on a long history of investing in this manner. Fund manager Jamie Jenkins looks to avoid those companies doing harm to the world while seeking out those making a positive contribution. The fund invests on a global basis and has nearly 60% in the US in well-known companies like Apple and Mastercard.”
Methodology To work out our winning funds we used data provided by Financial Express. We took the top 20 funds over three years from a range of popular sectors and then aggregated their performance over three, five and seven years. We ruled out funds with higher charges, and the final decisions were made by the Moneywise editorial team.
- Managers: Hamish Chamberlayne and Aaron Scully
- Ongoing charge: 0.84%
- Value of £1,000 invested five years ago: £1,950 (95%)
Highly commended: BMO Responsible Global Equity