Smaller managers top list of outperforming equity fund groups

Sergeant Hugh River and Mercantile
River and Mercantile’s Hugh Sergeant is head of the UK equities team

Boutique and mid-sized asset managers continue to populate the top 10 best performing equity fund groups, overtaking larger fund houses, Fund Calibre’s research shows.

This year’s Fund Calibre’s Fund Management Equity Index, which analyses the five-year performance of actively managed funds against their sector averages, shows River and Mercantile has been the best performing group with five of its funds reaching a 51.33 per cent average outperformance.

The UK equity specialist group entered the list when it was launched in 2015, starting at 16th position and climbing to 5th place in 2016. Fund Calibre says R&M’s two recovery funds had “particularly strong years”, as their value style came back into favour.

R&M’s funds were the UK Equity Smaller Companies, UK Equity Long-term recovery, UK Dynamic Equity, UK Equity High Alpha and UK Equity Income funds.

R&M Asset Management chief executive James Barham tells Fund Strategy: “We believe passionately in the importance of an investment philosophy and process that reflects the longer term beliefs and experiences of the portfolio managers.  It is this structure that allows our managers to remain true to their investment beliefs during those inevitable difficult periods and insulates them from the unnecessary noise and distraction of day to day market movements.

“The market is a living and breathing being and an investment  process, like any good fund manager, must evolve and learn over time from its experiences.  Equally the existence of a process is insufficient in isolation, it is the disciplined implementation that really counts.”

Other smaller-sized firms in Fund Calibre’s list, such as Stewart Investors (10 funds), Unicorn (4 funds) and Baillie Gifford (16 funds) ranked third, fourth and fifth in the list, with the latter climbing five position since last year.

Meanwhile, only Old Mutual Global Investors (5th place) and T. Rowe Price (9th place) entered the top 10 in the ranking among the largest fund firms, but with 24 and 12 outperforming funds respectively. They dropped from 3rd and 4th positions last year.

However, other large asset managers in the list have proven to be almost consistently successful with the likes of Schroders, Fidelity and Invesco Perpetual.

Of Schroders 43 funds in the list 88 per cent have outperformed, followed by Fidelity with 74 per cent of 38 funds and Invesco Perpetual with 90 per cent of 29 funds.

FundCalibre managing director Darius McDermott says: “At a time when cheap passive funds seem to be getting all the focus, I think it is really important to highlight that a good actively-managed fund can really add value for investors.

“There are some great companies out there, from boutiques to global fund houses, which consistently outperform. Our index analyses the five-year performance of equity fund providers and the results show that, if you do your research, you can find some very good actively-managed funds that repeatedly do well for their investors.

“Consistently good active management is not a myth. Six groups have been in our top 10 in the past three years, each in turn demonstrating outperformance over rolling five-year periods. This suggests a high degree of skill among their fund management teams.”