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Update

According to Columbia Threadneedle Investments Multi-Manager FundWatch, the number of funds consistently delivering top-quartile returns over three years hit a record low for the third quarter in a row in Q3 2022. 

Amid continued market volatility, rising interest rates and inflation, and geopolitical noise, just three (0.25%) of 1,174 funds achieved top-quartile returns over three years over the quarter.

This is the lowest proportion recorded since the survey began in 2008 and follows previous record lows set in Q1 2022 when five funds (0.45%) consistently achieved top-quartile returns and Q2 2022 when four funds achieved that (0.35%).

The three funds - from a variety of IA sectors - that achieved top-quartile performance in Q3 were Waverton Global Strategic Bond (IA Mixed Bond), Wellington Climate Strategy (IA Global Equity), and Liontrust UK Micro Cap fund (IA UK Smaller Companies). These funds were not among those achieving top-quartile returns in prior quarters. The survey’s authors said this shows there is no discernible pattern. The dominance of one investing style, such as growth or value, they argue, reflects a narrow market.

If we lower the consistency measure to above-median returns in each of the last three 12-month periods, Q3 saw a marginal improvement, with 60 funds (5.1%) doing so, compared with 58 in Q2. Twenty two of the 52 IA sectors made gains in Q3, with the large majority of the top-performing sectors to be found in USD bond, global equity linked, or emerging markets. 

The four worst-performing sectors were UK assets, either in gilts, corporate bonds or equity. All UK equity sectors fell during Q3 2022. But the IA UK Smaller Companies sector was at at the very bottom of the table for UK equities, down by 9.3%, while the IA UK Equity Income sector fell 6.4%. When it comes to UK bonds, the IA UK Index Linked Gilt sector fell 13.1%, having already dropped 20.2% in Q2. The IA UK Gilt sector and IA Corporate Bond sector were close behind, falling 12.6% and 9.4% respectively. 

Columbia Threadneedle investment manager Kelly Prior said another record low had not been unexpected. ‘It has been an exceptionally unusual year,’ she said, ‘with quantitative easing coming to an end and the arrival of inflation. With a shift in rhetoric from the world central banks, from accommodative to tightening, there is likely to be more volatility going forward. As in the recent past, consistency versus the average is likely to remain low. This is a rolling three-year statistic and we are currently in the eye of the storm of change.’

Link: https://www.investmentweek.co.uk/news/4059538/sustainable-funds-fall-short-sfdr-standards