As the oft-quoted disclaimer forewarns, ‘past performance is no guide to future returns’, yet those funds and managers that routinely outperform over economic and stock market cycles must be pursuing a winning process that should pique the interest of investors.

To find theses super-consistent unit trusts and open-ended investment companies (OEICs), Shares analysed data from FE Fundinfo to identify retail funds which have consistently appeared at the top of the performance tables. We narrowed our focus to nine key sectors out of the 35-plus sectors compiled by industry trade body The Investment Association (IA).

To qualify for inclusion in our screen, funds must have delivered top quartile performance over the one, three, five and 10-year periods to 14 January 2021.

Outperforming year in, year out is no easy feat, so the super-consistent funds that populate the tables in this article can be considered the best of the best within their respective sectors. In the following sections, we’ll look at a selection of these products split by fund sector.

IA UK ALL COMPANIES

In the UK All Companies sector, a trio of funds met our criteria. In the top spot based on 10-year returns is Royal London Sustainable Leaders Trust (B7V23Z9), which has returned the best part of 200% over the past decade.

Boasting a five-star Morningstar rating and a high sustainability rating (the clue is in the name) and managed by long-serving Mike Fox, the fund’s stated aim is to achieve capital growth from a diverse portfolio of mainly UK companies likely to deliver a net benefit to society in terms of their products or services they provide or that show ESG (environmental, social and  governance) leadership.

Reasonably concentrated, and thus representing Fox’s best ideas, the fund’s top portfolio positions at last count included utility SSE (SSE), which has reduced its reliance on fossil fuels and become a developer, operator and owner of low-carbon, renewable energy assets; Covid vaccine maker AstraZeneca (AZN); and sustainability-obsessed consumer goods colossus Unilever (ULVR), which has committed to making all suppliers pay the living wage by 2030.

Other names Fox holds include Rentokil (RTO), the hygiene-to-pest control giant, as well as consumer credit checker Experian (EXPN).

Hot on its heels in terms of 10-year performance are the £809 million Baillie Gifford UK Equity Alpha (0585819), managed with a long term, low turnover approach by quality growth seeker Gerard Callahan, and TB Saracen UK Alpha (0571119).

The latter’s co-manager Scott McKenzie says he remains ‘generally positive’ on the UK market given ‘the potential for positive earnings revisions from current low levels and improving outlook’. TB Saracen UK Alpha’s managers say they expect ‘a strong pick-up in M&A activity in 2021 as a result of low valuations in the UK, low interest rates and the wall of money in the private equity world looking for a home.’

They are also beginning to see evidence of a post-Covid-19 recovery in earnings expectations from UK companies. These improved revisions have emerged as corporates report strong recoveries following the initial lockdown, led by pent-up demand in many cases. ‘This combination of low valuation and improved earnings momentum may prove a potent one in the year ahead,’ say the managers.

IA UK SMALLER COMPANIES

Only one fund in the IA UK Smaller Companies sector has scored a top quartile performance for all the one, three, five and 10-year periods under analysis, and that’s FP Octopus UK Micro Cap Growth (BYQ7HP6). Managed by Richard Power, Dominic Weller and Chris McVey, the fund has returned 270% over the last 10 years.

Also sporting a five-star rating from Morningstar and adorned with five FE crowns, this still-nimble fund is managed with a winning ‘core-satellite approach’; the core of the portfolio is populated by ‘proven winners’, established, cash generative companies with strong management teams and track records. The satellites are the ‘emerging stars’, which are special situations such as IPOs, enabling the fund to take advantage of shorter-term market mispricing or extraordinary growth opportunities.

IA NORTH AMERICA

Our FE fundinfo screen reveals that the undisputed star turn of the IA North America sector on a 10-year time frame is the growth-focused Baillie Gifford American (0606196), having returned 864% over 10 years and 464% over five years according to the data. Holdings include Tesla, Amazon and Shopify which have all done well on the stock market recently, as well as positions in pandemic winners Zoom, Wayfair and Netflix.

The next best 10-year performer to meet our stringent consistency criteria is the $7 billion Morgan Stanley US Growth (4590842) fund. It has returned a spectacular 656% thanks to the investment team’s focus on quality established and emerging firms with sustainable competitive advantages, strong free cash flow yields and favourable returns on invested capital.

According to the end-November factsheet, leading portfolio positions include Jack Dorsey-driven payments processor Square and the aforementioned e-commerce platform Shopify. Morgan Stanley US Growth also has positions in music streamer Spotify and ride-sharing app-to-food delivery disruptor Uber.

IA GLOBAL

Within the IA Global sector, Baillie Gifford Global Discovery (0605933) has proved a super-consistent performer, putting up returns of 618%, 276% and 136% over the last 10, five and three-year periods, comfortably ahead of the 371%, 216% and 90% generated by the next best performer, T. Rowe Price Global Focused Growth Equity (BD44677).

Douglas Brodie-managed Baillie Gifford Global Discovery is invested in well-known growth names including Tesla, Ocado (OCDO) and property platform Zillow. The fund also has positions in companies that may be less familiar to UK investors such as telehealth platform Teladoc, implantable lenses play Staar Surgical and electronic fixed-income trading platform MarketAxess.

IA GLOBAL EQUITY INCOME

Only two funds in the IA Global Equity Income sector cut the mustard under our stringent long-term consistency criteria, being Baillie Gifford Global Income Growth (0577247) and TB Guinness Global Equity Income (BVYPNY2).

The Guinness fund is up 184% on a 10-year view thanks to the delivery of capital growth combined with a growing dividend. These performance figures are on a total return basis which assumes dividends are reinvested.

Launched in late 2010, this stellar performer is managed by Ian Mortimer and Matthew Page and invests in global equities with sustainable income growth. More specifically, the managers seek out companies with at least 10 years of persistent high cash flow return on capital every year, strong balance sheets and the robustness to stand up to economic shocks while delivering a sustainable, growing dividend.

This strategy certainly helped the fund during the height of the Covid-19 crisis, which forced many companies to slash dividends. Only one company in the portfolio cut its dividend in 2020, namely Imperial Brands (IMB), and zero portfolio companies cancelled their dividend completely.

In fact, 28 of Guinness Global Equity Income’s companies grew their dividend in 2020, and six maintained a flat dividend. While the dividend distribution for 2020 remains flat on 2019, the managers anticipate the payout will grow in 2021.

This concentrated, equally weighted portfolio of 35 stocks will appeal to investors seeking to protect against inflation over the long term, with holdings ranging from Medtronic and Taiwan Semiconductor to Abbvie, Raytheon and British American Tobacco (BATS).

HONOURABLE MENTIONS

In the IA Europe ex-UK sector, our research unearthed two super-consistent performers, namely Baillie Gifford European (0605825) and Allianz Continental European (B3Q8YX9).

The former scours the continent for companies with strong competitive positions run by management teams with the owner’s eye, with top 10 holdings including German duo Zalando (online fashion retailer) and Adidas (sportswear brand), as well as music streamer Spotify and food marketplace Delivery Hero. The large cap-focused Allianz fund is invested in the likes of luxury goods leviathan LVMH and ASML, the Dutch supplier of crucial equipment to semiconductor giants like Samsung and Nvidia.

Within the IA Asia Pacific ex-Japan and IA China/Greater China sectors, portfolios managed by Baillie Gifford pop up as impressive performers again. In the former camp, Baillie Gifford Pacific (0606323) heads up a quartet of ultra-consistent funds in performance terms, having risen 316% over the past decade.

Consistently first quartile ranked Baillie Gifford Pacific is a long-term Asian (ex-Japan) growth fund seeking quality companies that will outperform over a five year or longer time horizon. Managers Roderick Snell and Ewan Markson-Brown’s portfolio has an active share of 78% versus the MSCI AC Asia ex Japan Index benchmark as at 30 November, with top 10 positions ranging from JD.com and Alibaba to Tencent, Samsung and Ping An Insurance.

Active share looks at how different a fund is from its benchmark – a low percentage figure means it is very similar and a high figure means the portfolio is very different from the benchmark.

For the Japan category, T. Rowe Price Japanese Equity was the only fund to meet our stringent performance hurdle and has risen 209% over the past decade.

9 WINNING FUNDS TO BUY

IA GLOBAL

T. Rowe Price Global Focused Growth Equity offers exposure to quality international names including Facebook, Mastercard and JPMorgan Chase.

IA GLOBAL EQUITY INCOME

TB Guinness Global Equity Income would suit investors seeking strong total returns and inflation protection from a portfolio of quality companies with strong balance sheets and high cash flow return on capital. It has a 2.3% historic yield.

IA NORTH AMERICA

Morgan Stanley US Growth has generated stellar returns over the years. We like the fund’s focus on growth companies with sustainable competitive advantages and robust free cash flow.

IA UK ALL COMPANIES

We like Royal London Sustainable Leaders for its focus on quality and ESG factors as well as the lengthy tenure of manager Mike Fox.

IA UK SMALLER COMPANIES

Overseen by seasoned growth company expert investor Richard Power, FP Octopus UK Micro Cap Growth offers a compelling mix of proven winners and emerging stars.

IA EUROPE EX UK

Ultra-consistent Baillie Gifford European offers exposure to companies with strong competitive positions run by management teams with the owner’s eye.

IA JAPAN

T. Rowe Price Japanese Equity is a diversified all-cap portfolio offering exposure to typically 60 to 80 of its best growth ideas in Japan.

IA ASIA PACIFIC EX JAPAN

Having dramatically outperformed the three other ultra-consistent funds in this category, our top pick is consistent first quartile performer Baillie Gifford Pacific, which dares to be different from the index and backs quality companies that should outperform over a five year or longer time horizon.

IA CHINA/GREATER CHINA

Baillie Gifford China offers investors an easy way to get exposure to big themes in the Asian superpower with the portfolio having the largest weightings in tech, retail and pharma/biotech.

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