North American funds most consistent as Baillie Gifford crowned best performer
Global EMD local currency worst performing sector
The IA North American sector is once again the most consistent sector in the Investment Association over three years, retaining the title for the third quarter in a row, according to the latest quarterly BMO Global Asset Management Multi-Manager Fund Watch survey.
Within the sector, 7% of funds consistently achieved top quartile performance over a three-year period, while 26.7% of funds in the sector achieved median returns over the same time span.
Active funds achieve most consistent three year returns since 2008
Kelly Prior, investment manager at BMO Global Asset Management, described the performance of the region as "no surprise" thanks to "big tech stocks making up some of the biggest drivers of the US market rally".
It was followed by the IA UK All Companies sector, of which 6.1% of funds delivered this level of consistency, and the IA European ex UK, which saw 5.7% of its funds return top performance.
At the other end of the scale, the IA £ Strategic Bond sector failed to deliver any funds at all with this level of consistency, while IA Asia, IA Global Fixed Income, IA GEM, IA Japan and IA UK Equity Income only saw a single fund each make the grade.
Baillie Gifford American was crowned the top performing fund across all 39 IA sectors, delivering positive returns of 21.9% over the past three months, while TB Guinness Global Energy continued its negative run, returning -18% during the quarter.
Nearly three-quarters of all IA sectors made positive ground in the third quarter, with 29 of 39 sectors offering positive average returns. Year-to-date, however, less than half of the total sectors have made gains, with 19 of the total number growing assets, comprised particularly of risk assets and long-dated government bonds.
The worst performing sector of the quarter was the IA Global Emerging Markets Bond Local Currency sector, which was created on 1 January 2020 and fell 3.4% over the past three months, closely followed by the IA UK Equity & Bond income sector, which lost 2.7%.
Within UK Equity, smaller companies performed best, gaining 5.3%, although the sector is still down 11.7% year-to-date, while the IA UK Equity Income sector performed worst, dropping 2.1% over the quarter, with Brexit "surely a factor", according to BMO.
Prior, said: "The third quarter of the year proved to be something of a mixed blessing for investors.
"The consistency figures for the three years to the end of Q3 2020 came down to more normal levels. The IA Strategic bond sector has faltered somewhat, failing to record any consistently top quartile performers over this period. This is perhaps a reflection of the breadth of the mandates for the managers, with little gains in spread relative to a long duration strategy in recent times.
"Looking ahead, it is difficult to see markets making significant progress, and the brief moment in the sun for the unloved value segments of the market within the quarter was an interesting interruption to what has otherwise been a one way bet for all things ‘quality growth'.
"Nonetheless, our longstanding survey shows that there are funds out there which have proved their ability to navigate choppy investment markets and deliver alpha. It's never been more important to have a rigorous fund selection process in order to find the hidden gems that can position for the environment we are entering into rather than that which we have been in."
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