Investors who put money in some of the best-performing funds in the UK market would have generated handsome rewards above cash, according to recent research from AJ Bell.
Over the past five and 10 years, investors with money parked in cash would have made just 18% and 20%, respectively.
By contrast, savers who had put money in the FTSE All Share would be up 71% and 139%, an almost seven times return versus the bank over the past decade.
Dan Coatsworth, head of markets at AJ Bell, said: “The UK has been a more fruitful place to make money than its unloved reputation would suggest.”
See also: Merchants’ Gergel: ‘It’s an exciting time to be an investor in the UK’
But depending on the funds chosen, investors could have delivered even better performance than the benchmark average.
However, there were a handful of trusts where investors could have generated even better returns, according to AJ Bell analysts. The chart below shows the 10 best-performing UK funds and trusts over the past five and 10 years, as well as how they compare with cash and the wider market.
Notably, there were roughly five strategies that appeared on both lists, according to the research.
“There’s no guarantee these names will continue to smash the ball out of the park, yet their success over a long period suggests they’re not just lucky,” Coatsworth said. “They’ve hit upon a formula that works, and patience has yielded big rewards.”
Topping the five-year list is the Artemis SmartGARP UK Equity fund, which posted a 130% total return, compared with a benchmark average of 71%.
See also: SmartGARP in Five: Artemis SmartGARP fund range team
Managed by the founder of the SmartGARP process, Philip Wolstencroft, the fund uses Artemis’ in-house software to scan for companies growing faster than the market, but with lower valuations, to find names that look cheap relative to the opportunity on offer.
Notably, it is also the best performing open-ended fund over 10 years, rising more than 250%, making it a “striking example of what’s possible with investing when you get it right”, according to AJ Bell’s Coatsworth.
“Someone who put £1,000 into an ISA on 6 April (the start of the new tax year) every year for the past 10 years and immediately invested in Artemis SmartGARP UK would now have a pot worth £23,674.”
Dimensional UK Value also appeared on both lists, with the second-best performance over five years and sixth over 10.
Coatsworth said: “Dimensional UK Value does what it says on the tin.”
“It invests in UK companies that have attractive valuations – and this investment process has worked wonders for the fund over the longer term.”
Indeed, the strategy has outperformed its benchmark, the MSCI UK IMI index in seven of the past 10 years, faltering in 2018, 2019 and 2020.
Another value-style fund, the Invesco UK Opportunities fund, delivered a 101% total return over the past five years and 181% performance over the decade.
Led by Martin Walker and Bethany Shard, the managers believe the best ideas in the market are non-consensus and emphasise valuation at the point of purchase. “The fund managers believe that the UK equity market is undervalued versus its own history, but as ever, uncertainty abounds both at home and abroad,” according to the firm’s factsheet.
AJ Bell’s Coatsworth added: “The managers focus on their best ideas and would rather hold 35 to 45 stocks and show conviction in these names than spread the money across 100+ companies.”
On the trust side, Rockwood Strategic is another recurring name, taking home the title of top UK strategy over 10 years (310%) and sixth over five years (97%).
Lead manager Richard Staveley focuses primarily on small caps, targeting undervalued companies that are either misunderstood or have turnaround potential after a brief setback.
See also: What does the future hold for UK small caps?
It is a high-conviction strategy, with roughly 62% of the total asset allocation invested in its top 10 allocations, which the manager has cited as one of the big benefits of investing in small caps through the investment trust structure.
Temple Bar Investment Trust also proved to be a consistent outperformer, appearing highly on both charts.
Managed by veteran Ian Lance and Nick Purves, the equity income trust aims to provide growth in income and capital to outperform the FTSE All Share.
Currently, the portfolio has a 21.8% exposure to financials and a 16% exposure to communications. This is reflected in the top 10 allocations, with communication stocks such as ITV and BT, as well as banks such as NatWest, representing prominent positions.
This is far from the only income-focused fund to appear on the charts, with strategies such as the Vanguard FTSE UK Equity Income index and the Man Income fund also appearing on the chart, among others.
“A lot of people think income-style investments lack excitement compared to the fast growth you might get with tech stocks,” Coatsworth noted.
“What’s underappreciated is the power of compounding – reinvesting dividends over 10 years is the secret sauce to a tasty investment portfolio,” he concluded.
