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Top performing funds since 1990 By Jeff Salway
If you leave some money in equities for the long term, the chances are you will end up much better off than if you had left it in a savings account. This has been borne out by the impressive sums that some of the best funds have A lot of investors have lost a lot of money by investing in poorly-managed funds and schemes that were too good to be true. But many more have reaped the rewards of dipping a toe in the stockmarket. Not one of the sector categories used by the Investment Management Association has had a negative average fund return over Moneywise's lifetime. It is true that some are far superior to others, but the average fund will still have grown your money. For example, the average fund in the biggest UK sector, UK All Companies, has grown by 360% since 1990. Trends since 1990 Good past performance, however, doesn't guarantee a fund will succeed in the future. But the last decade and a half has provided lessons and trends that investors would be wise to take note of. A lot of the top funds have fallen by the wayside, while many of today's big sellers were launched relatively recently. Similarly, the companies that invest your money for you have also changed. Another big shift in recent years, especially since the boom period of the late 1990s, has been the emergence of the fund manager as a brand. The cult of the fund manager has grown on the back of the profile enjoyed by a select group of managers whose names influence investor decisions. However, an industry survey last year suggested that just 12 of around 900 managers have consistently outperformed both their peers and their benchmark since the start of 2000. Funds that made money So, which funds would have made the most of £1,000 invested in July 1990? Given that many US funds are currently struggling, you might not expect the US Smaller Companies sector to boast the fund that has offered the best return. But, the Schroder US Smaller Companies fund has turned that investment into an outstanding £15,686.46 in the last 16.5 years. The fund, launched in 1990, is a fairly concentrated portfolio, with 150 stocks from around 3,600 potential firms. Its strength lies in the experience of its management team and its reliable philosophy. The performance of the Schroders fund reflects that of its sector, the North America Smaller Companies, which boasted the best average growth (550%) for the period between July 1990 and December 2006. Over the long term, the US Smaller Companies sector could still be a good buy, as long as you're aware that the volatility of small caps means they will fluctuate. The European Smaller Companies sector generated the second-best average fund performance, while fourth-best was the specialist sector, which includes the next best fund since July 1990: the Merrill Lynch Gold & General. The Merrill Lynch fund is in a sector that has experienced a boom in recent years, but it benefits from having specialised in gold and commodities before it was fashionable. The fund, which has made £13,240 from £1,000 - and grown by over 1,000% since its launch in 1988 - is a portfolio of commodities stocks, so its return has been accompanied by some volatility over that period. That it still proves such a good investment after 16 years underlines the need to view equities as a long-term investment. Emerging markets With most gold to be found in emerging markets, and China driving global demand, the fund's success - and volatility - is far from over. On the subject of volatility, funds investing in Japan have experienced so much that even the best ones have done very little with £1,000 they were given in 1990. Top is the Baillie Gifford Japanese fund, with £1,995, but a large number of funds in the sector would have lost much of a £1,000 investment made in mid-1990. The story has been different in most other Asian and emerging markets regions. Robin Geffen, Neptune Investment Management, says the story has been different in most other Asian and emerging markets regions. "In 1990, you couldn't invest in China or Russia, but they have been spectacular subsequently," he points out. "You just couldn't have forecast their emergence on the global stage." He also alludes to the 'Asian Tiger' countries that emerged in the late 1990s, such as Malaysia, Indonesia and South Korea. But, a lot of the funds that focused on these countries vanished when the region experienced severe economic turbulence in 1997. Assets in technology While the global growth sector is one of several to which emerging markets are very relevant, the best fund in the sector since July 1990, the Invesco Perpetual Global Smaller Companies, invests largely in the US and UK. About 10% of the fund's assets are invested in technology firms, taking advantage of a rebound in that sector. The dotcom boom of the late 1990s is perhaps the biggest single investment story - and most graphic lesson - of the last 16 years. In 1999, investors ploughed their money into hi-tech firms, fuelling the stratospheric growth of the sector, and many of them are still in the red. Those that were carried along on the wave of tech-hype suffered worst, as they were least likely to diversify their investments to reduce risk. Funds launched at the height of the boom would all have returned around £300 (at best) of a £1,000 investment made in 1999. UK stock In 1990, if you wanted to invest mostly in UK stocks, the UK Equity Income sector would have been your best bet. One fund, the Jupiter Income Trust, has turned £1,000 into £11,651 since July 1990, despite focusing more on providing a strong income stream than on growth. Since its launch in 1987, it has attracted £3.6 billion in investment and grown by 973%. The Invesco Perpetual High Income fund has turned £1,000 into over £11,000 in Moneywise's lifetime, and is heavily invested in utilities and tobacco companies, but tends to have less exposure to areas like banks. In the UK All Companies sector - the biggest category with over 330 funds - Artemis Capital has been the pick of the bunch over the last 16 years, investing in large UK companies, has made £10,249 from a £1,000 investment. Since its launch in 1986, the fund has grown by over 1,800%, well above the 622% sector average. All of our top funds since 1990 have been equity funds, but we have also looked at UK Corporate Bond funds, which have at times been very popular with investors. The New Star Sterling Bond fund has converted £1,000 into a very respectable £4,227; due largely to its range of expertise in different areas, and this gives it the edge over other investment houses when it comes to bonds. Funds of the future Jupiter Emerging European Opportunities JO Hambro UK Opportunities Threadneedle Latin American Standard Life Investments UK Equity Unconstrained
T Bailey Growth
Rensburg UK Managers Focus Trust JO Hambro UK Equity Income Cazenove UK Dynamic
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