Active managers outperform passive in UK

Laith Khalaf, Senior Analyst, Hargreaves Lansdown

Laith Khalaf, Senior Analyst, Hargreaves Lansdown

The average UK fund has returned 90% since December 1999, this compares with a return of 68% from the FTSE 100, with dividends re-invested, according to UK investment management firm Hargreaves Lansdown.

With UK managers increasingly investing outside the big blue chips of the FTSE 100, Hargreaves Lansdown says it is more appropriate to compare them to the FTSE All Share, which includes medium and smaller companies.

Over this period the FTSE All Share has also returned 90%, so the average active manager has performed exactly in line with the market, on average.

“While the FTSE 100 has only just recovered its 1999 high, some funds have made serious amounts of money for investors. This tells us some active managers do significantly outperform the index, even if many don’t. If investors can spend a little time picking out the winners, they stand a good chance of making themselves much wealthier,” said Laith Khalaf, Senior Analyst, Hargreaves Lansdown.

Marlborough Special Situations was the best performing fund over this period. It has been run continuously by Giles Hargreave. A £10,000 investment on December 30. 1999 would today be worth £71,770.

Schroder Recovery was the best performing UK fund over this period, excluding funds in the UK smaller companies sector. A £10,000 investment on December 30, 1999, would today be worth £50,877.

The performance of these funds illustrates the long-term rewards on offer to investors who pick good quality active funds. By comparison a typical UK index tracker fund would have turned £10,000 invested in 1999 into £17,900 now.

The best sectors for investment since 1999 have generally been in the emerging markets. Among the UK sectors index-linked gilts led the way. UK Smaller Companies were the best performing UK equity sector, followed by UK Equity Income, with the UK All Companies sector bringing up the rear.