The six most-consistent funds over three years

The survey reveals improved performance for funds in the fourth quarter of 2022, with 44 of 57 sectors in positive territory.

Just six funds have achieved top-quartile performance over the last three 12-month periods, according to research from fund manager BMO Global Asset Management.

The quarterly FundWatch survey, which analysed 1,219 funds with a three-year track record in 12 sectors, revealed that the six funds that achieved a high level of consistency were: Invesco European Focus, Liontrust European Dynamic, Invesco Global Emerging Markets, Liontrust UK Micro Cap, TM Stonehage Fleming AIM, and L&G Dynamic Bond.

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For the same period last year, 31 funds delivering consistent top-quartile returns. BMO says that this reinforces the impact of the challenging global economic markets and increasing geopolitical tensions in 2022.

When the hurdle is lowered to median returns, 82 funds consistently delivered returns above the sector average in each of the three last 12-month periods. This was up from 60 funds in the previous quarter.

In terms of sectors, the most consistent for median returns was UK smaller companies, which saw 15.2% consistently beat the sector average. The least consistent, with just 4.4% of funds performing above this hurdle, was Europe ex UK.

Smaller stocks tend to be more volatile and less well researched than large companies, which gives active managers a better chance of beating a benchmark than simply owning stocks according to their size.

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The survey, however, reveals improved performance for funds in the fourth quarter of 2022, with 44 of 57 sectors in positive territory. This is above the previous quarter number of 22.

US and dollar-linked assets accounted for most of the sectors that saw their performances cool in the final quarter.  

Kelly Prior, investment manager in the multi-manager people team at Columbia Threadneedle Investments, says: “Unsurprisingly, consistency remains elusive in the rolling three-year periods to the end of 2022 as we move from a low inflation, low-interest rate world to something a little less familiar in the investment universe.

“With the Federal Reserve now closer to the end of its tightening cycle, while the Bank of Japan is potentially just getting started, the fortunes of the relative currencies against sterling, which is sitting somewhere in the middle, is stark.

“Often seen as the release valve when economies come under pressure, it is lining up to be an interesting 12 months for the world major currencies as the central banks of the world enact their quantitative tightening plans at different points to reflect the various drivers of inflation and how to combat them.

“Volatility is normal and welcome – as are the actions of the speculators who hasten to make predictions following central bank announcements – but active management will look through the noise and pick the better longer-term investment and return opportunities.”