Fund Management Equity Index 2018
Our annual Fund Management Equity Index is designed to help investors identify those asset...
FundCalibre’s Fund Management Equity Index helps investors to find those fund houses that are consistently strong stock-pickers and able to repeat their excellence in equity fund management.
River and Mercantile, one of last year’s biggest gainers, continued its rapid climb upwards, leap-frogging four other companies into the top spot of FundCalibre’s Fund Management Equity Index 2017. Its average fund outperformed its peers by 51.3% over the five years to 31 December 2016*.
Nine out of last year’s top ten groups maintained their high standards of consistency and retain their Elite Provider status this year.
Particularly impressive is the performance of a number of larger groups: 11 out of the top 20 companies have 10 or more funds. Schroders, for example, has 43 qualifying equity funds, 88% of which have outperformed their peers over five years.
This year, we have included specialist equity funds such as those investing in single country or single sectors. This means that the results of the top performers are even stronger, and a number of newcomers have entered the table.
|Rank 2017||Rank 2016||Fund Group||5 yr ave. outperformance||% of funds outperforming||No. of funds|
|1||5||River and Mercantile||51.33%||100%||5|
|5||3||Old Mutual Global Investors||25.41%||67%||24|
|9||4||T. Rowe Price||21.25%||83%||12|
We often forget that the asset management industry is one of this country’s strongest sectors.
As was the case last year, some fund groups delivered outperformance across all, or the majority of, their funds, while other fund groups saw a lower percentage of their total funds outperform.
This means that in some cases, fund groups’ average performance was significantly assisted by particularly strong performance among a few of their funds, for example Man GLG with its Continental European Growth fund and Old Mutual Global Investors with its UK Dynamic fund.
Particularly impressive is the performance of a number of larger groups: 11 out of the top 20 companies have more than 10 funds and nine of these companies had more than 70% of their equity funds outperforming. Schroders, for example, has 43 qualifying equity funds, 88% of which have outperformed their peers over five years. Fidelity has 38 qualifying funds, 74% of which have outperformed over the same period.
The index shows a significant gap in performance between the best and the worst groups. Here, we look at a few fund houses in a bit more detail. Percentage figures show the average fund’s 5 year outperformance for each fund group.
River and Mercantile leaf-frogged into first place this year having been fifth in the 2016 Index. It is a small boutique asset manager that mainly focuses on UK equities. Their two ‘Recovery’ funds had particularly strong years, as their value style came back into favour.
Asia and Emerging markets specialists Stewart Investors have had another good year, holding second position and improving their average outperformance by 5%. All ten of their qualifying funds did well versus their peers over this period.
Although pushed down into third place this year, small-cap specialist Unicorn topped our index for two years in a row. The past 12 months have still been good for the company and it has maintained an impressively high level of performance across their funds.
Last year was another strong year for this Scottish fund manager and it has moved up from 10th place to 4th on our list. Recent performance was particularly impressive given Baillie Gifford is usually known as a growth house and 2016 was a year in which value outperformed. Outperformance was led by the highly regarded Elite Rated Baillie Gifford Japanese fund, which was the number one fund in the IA Japan sector in 2016.
Old Mutual Global Investors is the largest group in the top five, with 24 qualifying funds. 67% of these funds outperformed their peers and the average performance improved slightly on last year’s results. Old Mutual’s UK Smaller Companies funds had a particularly strong year.
Charlemagne – in at 15
Hermes – in at 18
Matthews Asia – in at 25
Davy – in at 29
Polar Capital – in at 32
Among the top five newcomers this year, there were two overwhelming themes: the majority are specialist investment houses with a focus on country or sector specific funds, which were added to the analysis in 2017, and all had a number of funds celebrating a five-year track record, which means more houses met the qualification criteria.
Matthew Asia, for example, has a range of Asia country specific equity funds and Polar Capital has a range of very good sector specific funds.
The index also looks at funds’ performance against their sector’s average Sharpe ratio to see which fund groups are achieving the best risk-adjusted returns.
Risk-adjusted performance is important, because if fund managers are taking more risk, you would expect them to achieve a higher return. This is definitely something to look out for with fund selection. Funds that are taking excessive risk but only delivering average returns may be ones to avoid.
In particular, funds with higher risk levels will probably perform badly during times of crisis. Funds that are less risky may perform better in times of crisis.
Our risk-adjusted index uses the Sharpe ratio. It is one of the most widely used metrics for measuring a fund’s risk-adjusted performance.Very simply, higher performance and a lower volatility gives a higher Sharpe ratio (meaning a better risk-adjusted investment).
We compared each fund’s Sharpe ratio with their average Investment Association fund sector Sharpe ratio.
|Rank 2017||Fund Group||% of funds outperforming ave. IA sector Sharpe||No. of funds|
|1||River and Mercantile||100%|
View the complete risk-adjusted list with all 77 fund groups
FundCalibre’s Fund Management Equity Index looks at all actively managed equity funds recognised by the Investment Association and compares them with their sector averages over a five year time frame*.
Each fund group’s funds are then collected together to calculate the group’s average fund performance. Fund groups must have a minimum of four qualifying funds to be included in the index.
Where appropriate we have broken down fund houses into different fund groups. Some asset managers operate independently, but remain part of a wider group. For example, AXA Framlington and AXA Rosenberg are presented separately.
Although our main index looks at sector outperformance, we also wanted to assess groups on a risk-adjusted basis. We looked at various methods of doing this. By far the most consistent and fair metric, in our view, was the Sharpe ratio. The Sharpe Ratio is one of the most recognised risk-adjusted performance measures in the industry.
We concluded that looking at fund houses’ mean (average) Sharpe ratios on an absolute basis was unfair. This is because some sectors have much higher Sharpe ratios than others. Therefore a fund house with lots of funds in one sector with a high Sharpe ratio would be more likely to rank highly on our index.
In our view a fund group can only provide the best risk-adjusted returns for the part of the market they sit in. Therefore, a much fairer measure was to consider each fund’s Sharpe ratio versus the mean Sharpe ratio in its Investment Association Sector.
(annualised return – risk free rate)/annual standard deviation The annual return was compiled using 5-year daily data from FE Analytics. The annual standard deviation data was compiled using 5-year weekly data from FE Analytics. The risk free rate was taken to be the shortest dated government bond. Since this is primarily an index of UK funds, we decided that the 1-month UK T-Bill was most appropriate. The annual return of the risk free rate was therefore calculated as 0.35%, from data provided by FE Analytics.
The index does not account for survivor-ship bias. Funds that have been closed down or that have been merged with other funds are not included in these results.However, a list of those funds which have been closed or merged are below for information.
Funds closed or merged since the 2016 index: Franklin European Growth, Franklin Global Growth, Franklin Mutual European, Gam Star Gamco US Equity, Man GLG American Growth, Neptune Greater China Income, Sarasin Equisar Thematic Opportunities, Scottish Widows HIMFL Emerging Markets Focus, Scottish Widows HIMFL European Focus, Scottish Widows European Strategic, Scottish Widows Far Eastern Focus, Scottish Widows Japanese Focus, Scottish Widows UK Focus, Scottish Widows UK High Income, Scottish Widows UK Smaller Companies Alpha, Scottish Widows UK Strategic, Scottish Widows US Focus, Scottish Widows US Strategic.
*All data used to compile the Fund Management Equity Index is taken from Financial Express Analytics. All cumulative statistics % change bid to bid, net income reinvested, five years to 31/12/2016.
**Please note FundCalibre has included or excluded funds in very few cases at its discretion, based on what it believes will provide the fairest comparison of each fund group’s performance over the time period. These funds are listed above, under ‘Weaknesses of the index’ sub-heading.
These are purely statistical charts. While every effort has been made to ensure the accuracy of this information, FundCalibre takes no responsibility for any errors, omissions or inaccuracies therein.
Please note the Fund Management Equity Index does not constitute investment advice. If you are in any doubt as to the suitability of any investment you should seek professional advice. An appearance of any fund on this index is not an indication it should be bought, sold or switched.
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