Active managers with 10-year track records are a rare breed, and those who have outperformed over that period are even more difficult to find.
Citywire’s head of investment research, Frank Talbot, says: ‘While many active managers will look back on the rally of the past decade with disdain and regret, there have been individuals who have stuck by their aggressive strategies, and it has paid off in a big way.
He adds: 'Less than a fifth of managers get to a 10-year track record, and even with survivorship bias, only 39% of managers were able to outperform over the past decade. So, to add value to the extent that these individuals have is highly impressive.’
Here, we highlight the top managers across nine sectors over the last decade, and take a look at how they are currently faring.
Considering US equities have had a tremendous run since 2009, managing to beat both the index and the peer group average is an impressive achievement. Larry J Puglia has been managing US large cap funds since 1993 and his overweight in the T Rowe fund to technology names has been a significant driver of performance. The fund’s most overweight position, at 12.6%, is to consumer discretionary names.
Puglia has consistently been overweight healthcare and would have benefited from a sharp rally in this sector from the beginning of 2013. Consumer staples is the biggest underweight in the portfolio. Within tech, he has diversified across US and Chinese names, adding Tencent and Alibaba to the portfolio in the last quarter. Over the quarter, the main detractor from performance was Amazon, while the main contributor was Tencent Holdings.
Hideo Shiozumi’s Legg Mason fund was launched in 1996. Like many of its peers in December, the fund struggled, returning -21.03% in the fourth quarter, which meant a -10.56% return in 2018. However, this was still above the average sector return of -11.5%. Over the long term, the fund remains the top performer in the sector.
In a note, the company said: ‘The fund’s investment strategy was unchanged, as it focused on domestic-oriented sectors that the manager believes will be major beneficiaries from work-style reforms. These include medical and nursing care services, outsourcing business and e-commerce. There was one new addition to the fund in December, UUUM, an agency for “YouTubers”. Three holdings, which collectively accounted for 1.3% of the portfolio, were liquidated in order to consolidate the portfolio.’
Alexander Darwall has been at Jupiter since 1995 and has been managing the Jupiter European fund since January 2001. According to Citywire data, he has been consistently rated since October 2009.
The Jupiter fund typically holds between 30 and 45 companies. At the end of December, it had a 33% exposure to Germany and 14.3% to France. The main sectors it is invested in are industrials, health care and consumer goods, with the former having a 28.3% allocation.
Top holdings include Adidas, which was up 9% in 2018, and Wirecard, up 42% over the period, but now mired in a potential fraud scandal.
Outperforming in emerging markets has been all about managing the ups and downs in the market and having the patience to stick by your convictions. A decade ago, the sector was a strong performer, but it was hit quite hard later on.
Over the last few years, emerging markets had a bit of a renaissance before last year’s sell-off and Geoffrey Wong’s outperformance shows he was able to capture the upside. The UBS fund he manages is currently overweight in China and financial services, which make up 33% and 32% of the fund, respectively. The fund's largest holdings include Taiwan Semiconductor at 6.85%, Samsung Electronics at 6% and Alibaba at 5.11%.
With all the noise around the UK equity income sector and the fall of so-called ‘star’ managers, it is sometimes easy to miss the top performing Chelverton UK Equity Income fund. Managers David Taylor and David Horner have been running the strategy since launch in 2006. Over the long term, it is top of its sector, however, the performance lagged in 2018.
The managers said that as a UK small and mid cap fund it suffered due to ‘anti-UK sentiment’ and a number of company issues, like profit warnings from McColl’s and Low & Bonar. They added: ‘Our reaction to the recent drawdown is the same as it has been in previous periods in that we look to improve the underlying quality of the earnings in the portfolio and rebuild capital.’
Ten years ago, Alex Wright was an unknown name, especially in the UK smaller companies world. Now he is top of the pile, which is no small feat. UK smaller companies have performed solidly over the last decade, especially in the last few years, albeit Brexit jitters made for a tough 2018.
The Fidelity UK Smaller Companies fund has returned nearly double the sector average of 305% over the last 10 years. Following the Brexit vote, he has stopped outperforming, and in the wake of a particularly difficult December, he has lost his Citywire rating for the first time. Currently, the fund has a bias towards industrials and consumer discretionary names, with the top 10 including John Laing, Serco Group and Millennium & Copthorne Hotels.
Many will be expecting to see Terry Smith or Nick Train at the top of the global equity sector, but both are shy of a 10-year track record. It has been difficult to outperform in global equities and Mark Urquhart’s Baillie Gifford fund’s overweight allocation to the US, at 57%, has certainly helped.
Among his top holdings are a number of technology companies, including Amazon, Tencent, Alibaba, Tesla and biotech firm Illumina. Since September 2013, Urquhart has consistently held a Citywire rating. In a recent update the management team noted that top contributors to performance in Q4 were Tesla, Tencent and Workday, while the detractors were Nvidia, Amazon and Netflix.
It has not been the decade to be a cautious investor in the tech world. Fortunately, that is not something this trio has ever had to worry about. Unsurprisingly, the fund this trio manages, Polar Capital Global Technology, has 76% of it allocated to the US and Canada. In its top 10, there are some household names, of course, such as Microsoft, Amazon, Apple and Alphabet.
The only two companies that are outside of North America are Tencent and Alibaba. It is an understatement to say tech companies have been doing well in recent years, considering Amazon is up 3,217%, Apple is up 1,071% and Adobe – another holding in the fund – gained 1,072% over the past decade.
Sterling corporate bonds has not been the place to be over the last decade, with returns in the space relatively limited. While the overall total return Bryn Jones, along with co-manager Noelle Cazalis, has managed during this period is much lower than some equity managers, compared with other corporate bond managers he has been able to deliver stellar returns.
Not only has he outperformed in this unloved sector, he has also managed to do this with the constraints of running an ethical vehicle. The largest allocation currently is to the banking and insurance sectors and the fund has a cash weighting of 3%.