It has not been an easy decade to be a fund manager. Brexit, a global pandemic, the largest war in Europe for a generation and an inflation crisis have punctuated a 10-year period which has seen significant market volatility. However, steering investors’ money through difficult waters is how a good fund manager earns their corn.

Using FE Analytics’ platform, Shares has crunched the numbers to identify funds with stamina.

At first, we set a goal of identifying funds and investment trusts which have delivered a minimum total return of 6% every year for each of the last 10 years. However, it is unrealistic to expect a fund or investment trust to do well every single year as stock markets move up and down. Even the best-run investment products go through bad patches.

That’s clear from looking at the performance data. The best we could find was one trust which had reached our returns threshold in eight of the 10 years and nine funds, from an admittedly larger universe, which had done so in nine out of the 10 years. There are 17 funds which have achieved this feat in eight out of 10 years and six trusts which have achieved returns of at least 6% in seven out of the 10 years.

In this article we reveal the names in question, ranking them by their 10-year annualised total return. We examine any patterns or trends which are thrown up and profile some of the investment vehicles. We also consider what the data reveals about the challenges of achieving positive returns during the last decade.

THE CREAM OF THE CROP

Let’s start with the funds which had delivered at least 6% total return in nine out of the past 10 years. Not all of these funds are actively managed and this list effectively tells us as much about the strong performance of the US market over the period as anything else, with nearly every fund having a North American focus.

This makes the achievement of those few actively managed funds which have been able to keep pace with runaway US stocks impressive. A tracker fund – L&G Global Health & Pharmaceutical Index Trust (B0CNH38) – is also a notable outlier. Its strong showing reflects both the consistency of this sector and its importance during the pandemic period.

Natixis Loomis Sayles US Equity Leaders (B8Y83Y0) is worth highlighting because it has cleared the 6% hurdle in every 12-month period bar one (between August 2021 and August 2022) and has the highest 10-year annualised return. The fund places a big emphasis on investing in businesses as partners rather than simply trading stocks.

It employs a seven-step research framework to identify those few high-quality businesses with sustainable competitive advantages to deliver profitable growth and which trade at a discount to intrinsic value. The fund’s holdings include Visa (V:NYSE) and Boeing (BA:NYSE) alongside several big technology firms. The ongoing charge is 0.6%.

All our other ‘nine out of 10-year performers’ failed to hit the mark in the most recent 12-month period to August 2023.

Interestingly, while the headline US indices have performed reasonably well over the last year, a lot of that has been linked to a handful of stocks, notably Nvidia (NVDA:NASDAQ), which has been helped by the hype around artificial intelligence and which is among Natixis Loomis Sayles US Equity Leaders’ top holdings.

Many stocks have struggled this year as inflation has continued to run hot and as central banks have responded with a rapid increase in interest rates. This is rarely a recipe for strong returns from equities.

COVID MADE A BIG DENT IN PERFORMANCE

If we also lose the year which encompassed the global sell-off linked to the Covid pandemic we come up with a broader list of names. Several have an income focus and while there are more US-focused funds on the list there are also names with a global remit.

This could be significant if we look at the potential for future returns. As investment disclaimers are keen to remind us, past performance is no guarantee of future performance and stretched US valuations could make global diversification important.

For an ongoing charge of 0.9% Morgan Stanley Global Brands (3248249) provides exposure to the some of the world’s leading household names. Strong brands matter for the most part because they give owners pricing power, which is the ability to increase the prices for goods and services without unduly impacting demand. The fund holds 34 names in total, including Microsoft (MSFT:NASDAQ) and the company behind Durex, Detoll and Nurofen, Reckitt (RB.).

Steered by Ben Leyland and Robert Lancastle, JOHCM Global Opportunities Fund (BJ5JMC0) is a high conviction portfolio of 39 holdings with no constraints in terms of following a particular benchmark.

The managers look to find undervalued quality companies based on the hypothesis that the market underestimates the value created by well-managed firms operating in growth areas which are reinvesting sensibly in their business. They operate a ‘sell-to-zero’ policy meaning that rather than trimming holdings when they identify a material downside risk, they sell out entirely.

Top holdings include outsourced supply chain and warehousing outfit GXO Logistics (GXO:NYSE) and dental supplies specialist Henry Schein (HSIC:NASDAQ). Its ongoing charge is 0.99%.

WHAT ABOUT INVESTMENT TRUSTS?

Losing the last 12 months and the 12-month period impacted by the pandemic reveals one investment trust which has achieved 6% or more in total returns in eight out of last 10 years. Namely 3i Infrastructure (3IN).

The trust comes from the same stable as private equity firm 3i Group (III), a core shareholder and one of the best performers on the FTSE 100 over the past decade. 3i Infrastructure holds assets which fit into one of five ‘megatrend’ categories including the energy transition, digitalisation, globalisation, demographic change and renewing social infrastructure.

Rising interest rates have led to higher discount rates on long duration assets like infrastructure. Two key elements make up the discount rate – the risk-free rate which is typically taken as the yield on government bonds and the risk premium which reflects the risk associated with investing your money. The risk-free rate has moved materially higher over the past 18 months or so. 3i Infrastructure is trading at a 12.7% discount to net asset value and has an ongoing charge of 1.59%.

Using the less onerous measure of seven out of 10 years at a total return of at least 6% we arrive at a slightly longer list of names. The success of the technology sector is reflected in the presence of Allianz Technology Trust (ATT) and Polar Capital Technology (PCT) on our list – both of which have achieved exceptional 10-year annualised returns.

Coming in behind them is Mid Wynd International (MWY). The trust has been managed for the past decade by Simon Edelsten at Artemis and looks for growth from long-term trends. It has a focus on quality stocks and a self-described disciplined approach which is intended to make it more resilient at times of crisis.

Along with the usual smattering of leading US technology names it also holds luxury goods giant LVMH (MC:EPA) and US healthcare and insurance firm UnitedHealth (UNH:NYSE). Its ongoing charge is a competitive 0.61%.

It is important to note that asset manager Lazard is taking over management of Mid Wynd, expected to happen during the fourth quarter of 2023. Lazard will take a quality growth approach.

Elsewhere, private equity trust Pantheon International’s (PIN) performance is impressive, particularly in the context of the patchier returns served up by the private equity peer group.

Investec analysts Alan Brierley and Ben Newell see Pantheon as a ‘core holding for investors looking for a high quality, actively managed and globally diversified exposure to private equity’ and the trust recently announced a £200 million share buyback as it looks to close a near-40% discount to net asset value. It has an ongoing charge of 1.25%.

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