Columbia Threadneedle Fund Watch: Recovery seen in top quartile consistency

Guinness Global Energy was the top performing fund across the IA universe

Kelly Prior, investment manager at Columbia Threadneedle
Kelly Prior


Columbia Threadneedle’s multi-manager team found the number of funds delivering consistent top quartile returns over a three-year period is closing in on surpassing the historic average. 

Fund Watch, a quarterly survey launched in 2008, analyses the performance of the funds universe and the IA sectors.

In Q3 2022, the number of number of funds delivering consistent top quartile returns over three years reached an all-time low since the survey began, with only 0.26% achieving this.

There has been a recent reverse in this trend, with the number of funds delivering consistent top quartile returns over three years increasing quarter-on-quarter and nearing the upper end of the historic range of between 2% and 4%.

See also: Rising bond yields: A one-off adjustment, or a warning light for investors?

As of the end of Q3 2023, 52 funds out of 1,323 funds (3.9%) have delivered on this criteria, driven by value-focused and short duration bond funds.

The IA Japan sector had the most consistently performing top quartile funds with 12.1% of offerings achieving this. This was followed by the IA UK Smaller Companies sector with 9.3% of funds. 

In contrast, investors analysing the IA Strategic Bond sector would have failed to find a single fund to meet this criteria over the three year period, while the IA Asia, IA Global Mixed Bond and IA North American sectors only secured one fund in their respective sector. 

The Guinness Global Energy Fund was the top performing fund across the IA universe constituents over Q3 2023.

See also: Are US equities overvalued, or are valuations just high?

Kelly Prior, investment manager in the Columbia Threadneedle multi-manager team, commented: “Having hit the all-time low point in consistency in this survey’s history a year ago, this quarter brought with it a continuation of the upward trend that started from that point.

“As is usually the case, this has been driven by a certain cohort, namely value funds in equity and short duration in bonds. However, the landscape is everchanging and the types of fund and manager that can succeed will need flex to reflect the opportunity set. What we see today is a stark contrast to three years ago, when the key characteristics for consistent funds in Q3 2020 were growth and long duration.

“With the shock of Covid and all the changes in the investment landscape that came with it rapidly shifting from the rear-view mirror to the windscreen, it is a natural time to think about where we may go from here.

“Interest rates and inflation are at an interesting juncture, so while we have seen a changing of the guards in terms of consistent funds we are undoubtedly about to see a difference in the characteristics of what leads the performance pack in the coming quarters.”

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