Number of funds delivering top quartile returns falls short of historic average

FundWatch survey finds

Despite an uptick in the final quarter of 2017, the number of funds delivering top quartile returns consistently over a three year period remains below the historic average.

According to the FundWatch survey conducted by the Multi-Manager team at BMO Global Asset Management, 1.24 per cent of funds delivered consistent top quartile performance over three years as at the end of Q4 2017. This compares to 0.8 per cent at the end of Q3 2017 and the historic average of between 2 per cent and 5 per cent. The IA £ Strategic Bond sector was the most consistent for top quartile returns at 4.6 per cent, followed by the IA UK Smaller Companies (4.4 per cent) and the IA Japan sector (4.2 per cent).

The number of funds generating above median returns in each of the last three 12-months fell from 9.7 per cent to 9 per cent at the end of Q4 2017. All 12 main IA sectors had funds met this criteria, with the IA UK Smaller Companies the most consistent sector 17.4 per cent funds achieving this feat

Markets continued to gain ground Q4 2017, with all 37 IA sectors achieving positive returns. The IA Japanese Smaller Companies sector was the best performing sector gaining 9.2 per cent, with the IA Asia Pacific including Japan sector following closely behind, rising 8.9 per cent. The IA Short Term Money Market and IA Money Market Sectors were the laggards, returning 0.02 per cent and 0.06 per cent respectively, demonstrating the challenge for investors holding cash during the current market environment.

Kelly Prior, investment manager in BMO Global Asset Management’s Multi-Manager team, commented: “Our survey shows fund managers are still finding it challenging to deliver consistent performance over the long-term. While we have seen a slight increase in the number of funds delivering top quartile performance over three years, it’s still falling short of the industry average.”