Only 11 funds in the Investment Association universe have successfully navigated Covid volatility to deliver consistent top-quartile returns over the last three years, according to analysis from BMO Global Asset Management.
The asset manager’s Multi-Manager FundWatch survey examines more than 1,000 funds to determine which have delivered top-quartile returns in each of the last three 12-month periods. The latest research is for the period ended 30 September 2021.
Normally two to four percent of the universe examined in the quarterly analysis achieve this benchmark. However, the latest BMO Gam analysis found just 1.03% of the universe made the grade, even lower than the 1.9% in the Q2 2021 survey. This increased to 10.21% when examining which funds achieved consistent above average returns over each of the last three 12-month periods.
Covid-19 batters active fund performance
Kelly Prior (pictured), an investment manager in BMO Gam’s multi-manager team, pointed out the beginning of the Covid-19 pandemic sits in the middle of the three-year period analysed.
“This period of volatility has had a negative impact on the consistent delivery of top quartile fund performance across the fund universe and this has therefore further bolstered investor demand for passively managed products.”
But Prior predicted the investment landscape could change in the coming quarters.
“As we start to see a shift in monetary policy, we expect this trend to reverse over time with a jostling for position going on within different areas of investment.”
Which funds delivered consistent performance?
UK and European equity funds dominated the list of most consistent performance while the Schroder Sterling Corporate Bond fund was the only fixed income product to make an appearance.
Half of the 12 main IA sectors failed to secure a single fund with top-quartile performance over the three years analysed: the IA Global Mixed Bond, IA Asia ex Japan, IA Emerging Markets, IA North American, IA UK Equity Income and IA £ Strategic Bond sectors.
Investment Association funds delivering consistent top-quartile performance
| IA sector | Fund |
| £ Corporate Bond | Schroder Sterling Corporate Bond C Acc GBP |
| Europe Excluding UK | Premier Miton European Opportnts B Acc |
| Europe Excluding UK | FTF MC European Unconstrained X Acc |
| Europe Excluding UK | Comgest Growth Europe Ex UK GBP SU Acc |
| Global | Gam Star Disruptive Growth Ord Acc USD |
| Japan | FSSA Japan Focus B Acc GBP |
| UK All Companies | Slater Growth A Acc |
| UK All Companies | Slater Artorius Acc |
| UK All Companies | MI Chelverton UK Equity Growth B Acc |
| UK All Companies | Slater Recovery A Acc |
| UK Smaller Companies | Liontrust UK Micro Cap Fund (I) |
Source: Lipper/BMO Global Asset Management; based on top-quartile performance in each of the last three 12-month periods.
The top-performing investments for Q3 2021
Regional equity funds delivered some of the best and worst returns in the quarterly period ended 30 September, the BMO Gam analysis found.
The newly-created IA India/Indian Subcontinent sector was the top performing IA sector of the quarter, gaining 14.8%, while the IA Japan sector was next best, rising 7.1%. Additionally, the £55m Liontrust India Fund run by Ewan Thompson was the best-performer over the quarter rising 18.46%.
In contrast, the IA Latin American sector, which is also a new addition to the IA universe, fell 12%.
The Investment Association has increased its number of sectors from 46 to 52 over the quarter. Alongside the Indian and Latin American sectors, the trade body has also added specialist sectors for Financials, Healthcare, Commodities & Natural Resources and Infrastructure.
Prior warned these niche investment areas may not always deliver consistent performance. “While some of the new IA sectors were some of the highest performers in the third quarter, history has shown that such focused approaches often come with additional volatility.”
In total, 42 out of 52 sectors delivered positive returns over the quarter.
See also: Investment Association seeks to break up ‘bloated’ Global and Specialist sectors
