Majority of funds fail BMO GAM’s consistency test

Added 7th August 2017

The number of funds consistently offering top-quartile returns has fallen again according to new research from BMO Global Asset Management.

Majority of funds fail BMO GAM’s consistency test

In the second quarter only 1.2% of funds classified by the Investment Association (IA) had produced top-quartile returns over three years BMO’s Multi-Manager Survey found, down from 1.6% in the first quarter.

It means out of 1,132 funds from across the IA sectors, just 14 produced consistent returns over a three-year period.

Kelly Prior, an investment manager in the multi-manager team at BMO, said moving market conditions made it hard to be a consistent high performer owing to the intrinsic differences in fund management styles.

“Our research shows that consistency remains an elusive feat with the figures continuing to be low,” she said.

However, she added: “It is worth noting that every IA sector is made up of a myriad of approaches, with very few managers claiming that they can outperform in all market conditions.

“With the past 12 months being post the Brexit vote, consistency may well have been impacted by this factor too. Therefore, one could argue it has never been more important for investors to understand how managers are positioned in these unusual times.”

The survey revealed only half of the 12 IA sectors had funds that delivered top quartile returns over three years, with the £ Corporate Bond sector the best performing of them all with 7.5% of funds making the grade.

The UK Smaller Companies sector also fared better than most with 2.2% producing top quartile returns, as did the Global Equity sector with 1.6% hitting the target.

If the hurdle was lowered to consider funds that produced above-median returns in each one year period over three years the results were better.

On this measure, 11.5% of funds performed well in Q2 of 2017, up from 10.9% in Q1, with 19.6% of funds in the UK Smaller Companies sector hitting the less-demanding standard.

The £ Strategic Bond and £ Corporate Bond sectors also performed well with 17.7% and 17.5% offering above-median returns respectively.

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Louise Hill

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Louise joined Portfolio Adviser in December 2016 as one of the editorial team’s news reporters based in London. Originally from Liverpool, she is an NCTJ-qualified journalist and began her career in 2014 working on local newspapers.

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