Japan and healthcare hit top returns - consistent 50 Oct 15 update

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Money Observer's Consistent 50 showcases some of the most consistent top performers in the Investment Association's (IA's) universe of around 3,500 UK retail funds.

To compile our list, we assess the three-year performance of funds in mainstream and comparable IA sectors over 30 individual six-month periods, looking for those that have ranked consistently towards the top decile.

A fund in the first decile means its performance is in the top 10 per cent of a sector's constituents. The consistency rank in the table overleaf shows the average decile rank over these rolling six-month periods.

This helps us to identify those funds that have consistently performed well throughout the three-year period, rather than those whose record is perhaps riding on, for example, just one year of strong performance.

REVIEW

Sorting for those with the strongest total return over the three-year period (with income reinvested), we then choose the 50 most consistently strong funds across a range of sectors, presented in order of their total return.

In this review, the top-performing fund based on these criteria is Lindsell Train Japanese Equity, which has returned an impressive 121 per cent over the three years to 1 September. More importantly for our analysis, however, it has on average ranked within the second decile of the IA Japan sector throughout that period.

This marks the fund out as one of the most consistent and least volatile of the open-ended Japan funds, which have tended to be as unpredictable as the region itself.

It is also notable that it is the only Japan fund to feature within the consistent 50 at all; however some of this will be due to the fact the share class in question ('B hedged dis GBP') is hedged, meaning it has been protected from the declining yen. It has been managed by Japan expert Michael Lindsell since its launch in 1998.

Lending a developed market edge to the Consistent 50, the second and third best performers over the three years to 1 September are North American fund Legg Mason Opportunity and UK equities vehicle Old Mutual UK Dynamic Equity. Like Lindsell Train Japanese Equity, Legg Mason Opportunity is notable as the only fund from its sector - North America - to make it into the Consistent 50.

Managed by Samantha McLemore since its launch in 2009, the fund is completely unconstrained and so can invest in equities, bonds, derivatives and other instruments with no restrictions on sector or market capitalisation. So far this has proved a profitable strategy, with the fund also ranking within the sector's top 20 funds over five years.

Old Mutual UK Dynamic Equity is one of six funds from the UK all companies sector to feature in the Consistent 50; however, in a sector of over 270 funds (the IA's largest) it has done well to differentiate itself.

Managed by Luke Kerr since its launch in 2009, the fund ranks within the top five funds in the sector over one year, three years and five years to 1 September, having performed consistently well through both up and down markets.

HEALTHCARE BOOM

In terms of sector-based themes, global healthcare funds have proved particularly consistent over the past three years, with three of the top six funds focused on the sector. The best performer in terms of total return and consistency is Money Observer Rated Fund Schroder Global Healthcare, delivering 24 per cent and ranking consistently between the first and second deciles over the period.

Fixed income, Asia and emerging market funds featured largely toward the bottom of our Consistent 50 table. Sterling strategic bond fund GAM Star Credit Opportunities GBP is the best-performing fixed income offering of our selection, having delivered more than 50 per cent over the three years to 1 September, while consistently ranking between the first and second decile.

First State Asia Pacific Sustainability was the best performer from the Asia Pacific ex Japan sector, delivering 35 per cent over three years while consistently ranking between the second and third deciles throughout. The fund is now closed to new investors.

Templeton Emerging Markets Smaller Companies was the best performer from the global emerging markets sector, delivering 29 per cent in the three years to 1 September.


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