Columbia Threadneedle: Only 27 IA funds achieve top-quartile performance over three years

Up from a paltry four strategies this time last year

Kelly Prior, investment manager at Columbia Threadneedle
Kelly Prior


Just 2.1% of funds maintained top quartile performance over three years to the end of June 2023, according to Columbia Threadneedle’s Fundwatch report for Q2.

Only 27 of the 1,286 funds in the 12 major market sections of the IA universe achieved top-quartile returns over three rolling 12 month periods.

However, consistent high performance is improving, particularly from Q2 2022 when only four funds (0.35%) achieved consistent top quartile returns over three consecutive years.

See also: New low for UK funds delivering top-quartile three-year performance

IA UK Smaller Companies housed the most consistent performers with 9.3% of funds achieving top-quartile returns over three rolling 12 month periods, followed by IA Japan with 7.4%.

On the other hand, the IA UK All Companies, IA Strategic Bond and IA Global Mixed Bond sectors failed to have any funds with consistently top-quartile returns in the three consecutive 12 month periods.

Kelly Prior (pictured), investment manager in the multi-manager team at Columbia Threadneedle Investments, said: “While economic growth trumped stubborn inflation and higher interest rates in the second quarter of the year, we are at multi decades of high interest rates in most major and minor economies of the world.

“It is generally accepted that it takes around 18 months for the impact of interest rates to have an effect on the real economy. As the first hike in the UK was in December 2021 and in March 2022 for the Federal Reserve in the US, investors should be thinking about when this will have an impact, and where.

“Against the backdrop today, cash has become a viable asset class, however this is not the automatic phenomenon that many assume, particularly as financial institutions are holding back in passing on rate increases. As is so often the case in investing, being active can make all the difference to the outcome you achieve.”

A tough quarter for UK sectors

Following a period of stubborn inflation and rapid interest rate rises, all three IA UK sectors struggled in Q2 2023.

The average fund in the IA UK All Companies sector fell 0.8% in the three months to the end of June, while the IA UK Smaller Companies dropped 1.4%. The IA UK Equity Income sector suffered the worst quarter of all, losing 1.7%.

The survey also highlighted a poor quarter for UK bonds. The change in prospects for interest rates and persistently high inflation caused the IA UK Index Linked Gilt sector to fall 8.8%, while the IA UK Gilt sector lost 5.6%. 

See also: Is there life in UK consumer stocks?

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