After a long period of underperformance from UK equities, investors have been warming up to the market after a long-awaited end to Brexit uncertainty and the continued easing of coronavirus restrictions.
But for investors who wanted exposure to UK equities at the start of the year, would they have been better off buying a passive index tracker? Or a top performing active fund?
Of the top-10 returning UK equity funds between 2015 and 2020, only half of them have managed to beat the FTSE All Share’s year-to-date returns of 10.66 per cent.
The table below shows the top-10 performing UK equity funds between 2015 and 2020 alongside their year-to-date returns, with the FTSE All Share index at the bottom for comparison.
Source: FE Analytics, data as at 21 Jun 2021
The results are mixed. From the top five returning funds, three of them have delivered index-busting returns year-to-date, whereas two of them have fallen to the bottom of the performance tables.
For example, the £1.5bn MI Chelverton UK Equity Growth fund remained a top performer year-to-date, but CFP SDL UK Buffettology and Baillie Gifford UK Equity Alpha have fallen to the bottom of the performance tables.
Looking at the entire Investment Association’s UK All Companies sector, 124 (roughly 60 per cent) of 202 actively managed funds managed beat the index.
The table below shows the 10 funds which outperformed the FTSE All Share index by the largest amount.
Source: FE Analytics, data as at 21 Jun 2021
The £16.9m Consistent Opportunities Unit Trust is the highest performing UK equity fund year-to-date, after more than tripling the index’s 2021 returns.
Managed by Jay Patel and Nicholas Pritchard, the UK-focused multi-cap equity fund has almost half of its portfolio invested in small-cap companies under £250m in size. The rest of its portfolio is invested in mid and large-cap stocks.
The £8.8m VT Cape Wrath Focus was the second highest performer year-to-date. The multi-cap fund follows a value philosophy and is run by Valu-Trac Investment Management.
The £727m Premier Miton UK Value Opportunities fund is another the multi-cap strategy that has managed to comfortably beat the index.
Headed up by FE fundinfo Alpha Manager Andrew Jackson, it also follows a value-philosophy with a somewhat concentrated approach holding between 50 and 80 UK-listed equities.
Elsewhere, whilst the £215m Aviva Inv UK Listed Equity High Alpha fund has outperformed the FTSE All Share index year-to-date, the strategy has underperformed over a five-year period.
When looking at the longer-term performance, of the 124 active funds that beat the FTSE All Share index year-to-date, roughly half (65) have a better five-year track record than the index.
Some of these funds include MI Chelverton UK Equity Growth, Slater Recovery and VT Sorbus Vector.
When it comes to the underperforming funds, out of the 202 actively managed funds in the sector 73 of them have underperformed the FTSE All Share index year-to-date.
Below is a table of the 10 funds who under-performed the FTSE All Share index by the largest amount.
Source: FE Analytics
Baillie Gifford UK Equity Alpha and CFP SDL UK Buffettology were two of the top-five performers between 2015 and 2020. Both follow a growth-approach to investing, but year-to-date they have fallen to the bottom of the sector.
Another notable fund that has not managed to beat the index year-to-date is the £561m M&G UK Select fund.
Run by Rory Alexander and Garfield Kiff, the managers follow a growth approach which, although has struggled year-to-date, it has managed to beat the index over a five-year period.
Looking at the longer-term track record of the underperforming funds, of the 73 funds that failed to beat the index year-to-date, over than half of them (42) have beaten the FTSE All Share index over a five-year period.
For example, Baillie Gifford UK Equity Alpha and CFP SDL UK Buffettology have maintained their top quartile performance over five years, despite being at the bottom year-to-date.
Similarly, despite underperforming the index by around 1 per cent, Nick Train’s well-known £6.6bn LF Lindsell Train UK Equity fund has also managed to beat the index over a five-year period.