NOT JUST YOUR AVERAGE MANAGERS

Best of British list gives UK consumers’ confidence in Britain and shows active fund managers can weather the Brexit storm

With the triggering of Article 50 just around the corner, interest rates remaining low and inflation on the rise, people may be wondering where to put their money in this climate of change. The Best of British Fund Managers list revealed today by TD Direct Investing shows there are a group of British stalwarts who have delivered returns despite Brexit, and outperformed their sector and benchmark for the last decade net of fees.

Mark Slater, of Slater Investments, has once again been crowned the Best British Fund manager, with his focus on investing in smaller companies with unique business models and strong growth prospects continuing to prove attractive. Schroders has stormed its way into the list with three out of four of its funds new additions to the list. Every one of the top 25 has outperformed the FTSE all Share over the ten-year period. Slater delivered returns of 12.6% against the FTSE’s 5.6%, confirming that despite the turbulence of the referendum, active management is still very much alive and working in the UK.

Michelle McGrade, Chief Investment Officer of TD Direct Investing, says: “There has been much criticism of active funds, with many saying that the average manager has failed to beat the benchmark. But what this means is that people shouldn’t invest in an average manager. We analysed more than 400 UK funds looking for equity managers with a track record longer than ten years, so ranking in the Top 25 for ten-year performance is a great achievement – these managers really are the best of British.

The outlook for growth in the UK is strong with Theresa May at the helm, and a growth upgrade announced by the Chancellor in the recent budget. However, our own research has shown that investors are most worried not so much about the outcome, but the perceived resistance to it and the potential inability of the government to swiftly exit Europe.

Michelle McGrade continues: “The performance of the Best of British managers and the continued dominance of Mark Slater demonstrates the value of battle-hardened fund managers, and gives investors and savers reassuring inspiration for where to put their money, particularly as we approach tax year end and the date of the trigger.

Mark Slater, Chief Investment Officer at Slater Investments said: “I’m delighted to be at the top of the list again this year as it validates an extremely effective and long-standing investment process, a team that has worked together for many years and our long-term approach.

The Best of British research, now in its third year, reviews fund managers on their performance over the last decade and against their sector average. Slater was one of a number of fund managers who have maintained their ranking from last year showing that despite the volatile market conditions – and headlines – focusing on the long term and sticking with trusted fund managers is often the best approach to dealing with short-term turbulence.

Three Schroders funds are new entries into the list and James Rainbow, Co-Head of UK Intermediary at Schroders, said: “Taking a long term view of investments and the returns that skilled fund managers can generate for their clients are both things we are passionate about at Schroders. It is always welcome when our fund managers are recognised for the job they have done but it is particularly pleasing in this case. The research that TD Direct Investing have done for their Best of British List clearly demonstrates that there are managers who have added significant value to their clients’ investments over the long term. For our fund managers to be included amongst some of the best-known managers in the industry is a credit to the job that they have done.”

Trends

Key themes that TD has identified in its research include a shift away from growth-style investing, with value now appearing to be more in fashion. Additionally, managers with exposure to cyclical sectors including financials and materials are typically performing better since Trump’s election win and his promise to invest heavily in infrastructure. Finally, managers focusing on large-caps with a greater international exposure have tended to outperform especially since the decision to leave the European Union.

Recipe to success

Not everyone has taken the same route to the top of the list. Every manager uses a disciplined approach and sticks to their guns to the point of being stubborn, irrespective of what markets are doing. Investors can take a leaf out of fund managers’ books – if there’s one thing they’re good at it’s holding their nerve. But there are also many ways to skin a cat.

Four examples:

  • The lone hunter – Mark Slater buys for the long term, seeking companies with growth prospects and unique business models. He believes in running profits and cutting losses.
  • The scavenger – Alastair Mundy only looks at companies which are deeply unloved and have fallen 50% or more. It takes discipline to maintain this approach, especially during prolonged periods of underperformance, as can happen.
  • The historian – Nick Train hasn’t sold a stock from his fund since 2013. He spends most days reading and researching. But the numbers prove his approach works.
  • The power of the crowd – Majedie adopts a different approach to many, with four managers running their own portfolio, then blending them into an overall, diversified fund.

The Best of British list contains industry veterans with different styles and approaches who have demonstrated the ability to consistently outperform through different market cycles. The continued inclusion of fund managers identified in previous years, illustrates that their success is a result of discipline and focus and that, over the long term, quality comes to thefore.

You can find the hub here: https://www.tddirectinvesting.co.uk/best-of-british-fund-managers

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