Billionaire US investor Warren Buffett is famed both for his fortune and his folksy words of wisdom. Nobody disputes the abilities of the grand old man of investing, but that doesn’t make him invincible.
If he was, we should all buy shares in his Berkshire Hathaway investment vehicle, and let him get on with it. Yet we don’t. There will always be pretenders to Warren Buffett’s crown, and a surprising number reside on these shores.
Laith Khalaf, financial analyst at AJ Bell, points out that 2020 was not a vintage year for Warren Buffett, with Berkshire Hathaway returning 2.4%, against 18.4% on the US stock market. But his long-term performance numbers are “mind-bending”. He has delivered a dollar return of 2,810,526% since 1965, compared to 23,454% from the S&P 500.
These UK fund managers thrashed the market
Warren Buffet averaged an investment return of 20% a year over that time, roughly double the 10.2% return on the US stock market.
However, over the last 20 years, Berkshire Hathaway has returned 507%. That’s jolly good, but the best performing UK-based fund, Aberdeen Standard Asia Focus, returned almost four times as much at 1,975%.
One of the UK’s most popular funds, Scottish Mortgage Investment Trust, was second best performer, with a total return of 1,928%. It was followed by Baillie Gifford Pacific Horizon (1,900%) and Aberdeen New Thai Investment Trust (1,655%).
As you can see, three of these four funds are focused on fast-growing emerging Asia, whereas Warren Buffett mostly invests in larger US companies. However, as Khalaf notes, the S&P 500 has been the best performing major index of the last two decades. That should give him the edge.
Khalaf notes that UK fund management faves Nick Train and Michael Lindsell have done well from investing in comparable large cap-equities. Lindsell Train Global Equity is up 1,620% over 20 years, the fifth best performer.
It’s not easy to beat Warren Buffett
Some smaller companies have funds have also done spectacularly well. Marlborough Special Situations, which invests in UK small caps, is up 1,517% over 20 years. Scottish Oriental Small Companies, which invests in Asia-Pacific, returned 1,442%. Ninety One UK Smaller Companies (1,432%) and Jupiter UK Smaller Companies (1,414%) also smashed it.
As ever, past performance is no guarantee of future success, even for Warren Buffett (as he’d be first to admit). Asia’s rise to wealth and prominence is a historical phenomenon. Smaller companies can be more volatile, rising faster in the good times but falling faster in the bad.
In total, 160 UK-based funds and investment trusts posted returns better than Warren Buffett’s Berkshire Hathaway over 20 years. As many invest in smaller companies, emerging markets, or specialist themes, they aren’t directly comparable. Higher risk often equals higher returns.
I’ve noticed that myself, and buy Asia and smaller companies funds, while also searching the FTSE 100 for individual stock picks to turbo-charge my wealth.
Today’s successful fund managers may disappoint in future, but the long-term track records of those listed here suggest they rely on judgement rather than luck. However, I doubt any of them will still be investing at 90, like Warren Buffett.
