BMO GAM's FundWatch: 'Eerily stagnant conditions' continue to stunt performance

In the latest quarterly FundWatch survey, which is conducted by the firm's multi-manager team, 1.7% of the funds in the 12 major IA sectors analysed achieved top quartile returns in each of the last three 12-month periods. 

However, this falls short of the historic range of between 2% and 5% with the team highlighting the current challenging market backdrop of geopolitical risk, trade wars and record low yields.

Nonetheless, the number of funds achieving top quartile returns has climbed from the 1.6% in the previous quarter and the 0.8% seen in Q3 2017.

Of the 12 main sectors in the IA universe, the UK Smaller Companies sector was the most consistent with 6.4% of funds delivering top quartile returns over the past three years.

However, the Asia Pacific ex-Japan and £ Corporate Bond sectors did not have any funds achieving this feat.

The survey also looked at funds which delivered above-median returns over three years and found 14.4% achieved this, increasing from 12.4% in Q2.

In particular, 13 funds in the IA European ex-UK sector managed this, of which eight were index tracker funds.

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Kelly Prior, investment manager in BMO Global Asset Management's multi-manager team, said: "Our research shows that a difficult backdrop has led to funds failing to generate consistent outperformance over a prolonged period.

"The IA UK Smaller Companies sector secured the highest number of funds delivering top quartile and median performance, this is attributed to the sector not being as impacted by macro factors compared with the other sectors, allowing for superior stock picking which generates alpha.

"If we piece all the information together we can see how the continuation of low interest rates and absent inflation has created a vortex of goodwill for investments that benefit from the eerily stagnant conditions that we are currently experiencing."

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• Topics
• Funds
• Investment Association
• BMO GAM
• Multi-Manager
• survey
• outperformance
• IA sectors
• Kelly Prior
• tracker funds