Consistency key for fund performance
Consistency in fund performance is of paramount importance but in reality is something of a rarity, research from investment group F&C has shown. In order to see how many funds managed to achieve median or better performance in each of the last five calendar years, F&C’s research team looked at 16 Investment Management Association (IMA) sectors. The results showed only a handful of fund managers beat their peers and respective market indices in each of the last five years.
Among the largest – the UK All Companies sector – 12 funds were in the fiftieth percentile or higher from 2003 to 2007. In the Japan and Global Bonds sectors, no fund managed to deliver median or better performance in each of the last five years while in both the North American and Global Emerging Markets sectors, just one fund stayed ahead of the pack for five consecutive years.
The research also found the Equity Income sector to be one of the sectors where consistent funds have been most prevalent. A total of eight Equity Income funds beat the median for five years running.
Richard Philbin, head of funds of funds at F&C, said: “A handful of extremely capable fund managers have demonstrated their ability to consistently perform well across a range of market conditions. Yet most funds are not able to deliver either because manager turnover disrupts long-term performance records or, more commonly, because investment styles come in and out of fashion with changes in the market cycle.”