Funds struggle to beat benchmark

Only 13 actively managed equity funds in Europe - including just one British retail offering - have beaten their benchmark in every year of the past decade, according to research by Lipper.

The Beating The Benchmark study, written by Ed Moisson, the head of UK and cross-border research at Lipper, shows that 0.5% of Europe’s active managers have outperformed each year of the past 10.

Philip Rodrigs’ £367.3m Investec UK Smaller Companies fund is the only British retail portfolio to make it on to the list of consistent outperformers. The fund returned an annualised 15.4% over the 10 years to February ,without a single year below the FTSE Small Cap index.

About 34.9% of funds outperformed overall for the 10 years to the end of December 2011. In addition, 40% have beaten their benchmark over three years and 26.7% over one.

Moisson concedes the number of funds outperforming each year is “pretty small” but cautions against too much focus on short-term numbers.

“Because fund managers are managing money for the longer term, I don’t know how much it matters if for every single one-year period they fall below the benchmark,” he says.

“It depends how they’re doing over a longer period of time.”

The study goes some way towards supporting the view of Edward Bonham Carter, the group chief executive of Jupiter, that consistent outperformance is a “statistical fluke” and the industry is “flawed” for expecting benchmark-beating returns each and every year.