Interactive Investor

Juicy returns for Consistent 50 funds

28th February 2014 17:11

Holly Black from interactive investor

Our Premier League is not the only place to look for top performers. Our Consistent 50 lists some very worthy funds that have racked up some juicy returns.

The Consistent 50 lists funds with consistently good performance over the past three years to 1 January. To make it into the first tier, funds must have three consecutive years of first-quartile performance in their sector.

Those who don't quite make that mark enter our second tier, which is also ranked by overall three-year performance and contains funds that have spent two consecutive years in the first quartile of their sector and one in the second.

The list differs from the 15-strong Premier League in that it includes all bar four of the Investment Management Association's fund sectors. Neither does it take into account potential barriers to investment such as mandatory initial charges or high minimum investment levels. Legg Mason Japan tops the list with a meaty return of £225.90 on an initial £100 investment, vastly outstripping the rest of its sector.

Spotlight on Japan

Japan was firmly in the spotlight in 2013 as Japan's Prime Minister, Shinzo Abe vowed to get the country's economic policy on track once and for all. The sector performed well as a whole in 2013, but the years preceding that were tougher.

Indeed, this fund and Baillie Gifford Japanese are the only Japan funds to have made it into our consistent 50. The latter has produced a return of 38.7% over the past three years.

UK all companies funds were the standout performers over the past three years and account for 15 of the 50 funds. But it may be too late to jump on the bandwagon.

Jason Hollands, managing director of communications at Bestinvest, warns that "some of the more cyclical mid-cap and small-cap names are priced to reflect a lot of optimism about the UK recovery". He says investors "need to tread a little more carefully after such a strong run" and may find better opportunities in other areas.

Rebecca O'Keeffe, head of investment at Interactive Investor, is also cautious about the prospects for UK all companies funds.

"Despite analysts anticipating stronger growth this year, the key question for investors is: how much of last year's equity market rally has already been priced into this improving outlook?

"With households and governments looking to pay down debt before interest rates rise to unaffordable levels, markets may find 2014 more difficult than 2013," she says.

Nevertheless, the sustained strong performance of UK all companies funds can't be overlooked; indeed, they occupy eight of the top 12 positions in the table, with Invesco Perpetual funds accounting for three.

Leading the UK all companies ranks, and all boasting three-year returns in excess of 70%, are Invesco Perpetual UK Aggressive, Cazenove UK Opportunities and Ecclesiastical UK Equity Growth.

Invesco Perpetual is also the most-featured fund house overall, accounting for six of the 50 funds, with strong performers in the UK equity income, global and mixed sectors too. Nick Mustoe, chief investment officer at Invesco Perpetual, says 97% of the group's funds outperformed their peers over the past three years.

"Fortunately for us as bottom-up stockpickers, markets are not efficient and companies are often mispriced," he says.