Actively-managed funds have declined in popularity in recent years due to the rise of low-cost tracker funds. Many investors are asking: why pay fund manager fees when a lot of fund managers fail to consistently beat the market? The shocking performance of Neil Woodford’s Equity Income fund in recent years won’t have helped the case for active management.
However, personally, I still believe there’s a place for actively-managed funds within a portfolio. I wouldn’t expect them to outperform the market at all times as the market is unpredictable in the short term. However, over a period of five years or longer, I’d expect plenty of fund managers to beat the market. With that in mind, here’s a look at three UK equity funds that have easily beaten FTSE 100 tracker funds over the last five years.
Franklin UK Rising Dividend fund
This fund flies under the radar of many UK investors, due to the fact that US investment manager Franklin Templeton is not as well known in the UK as some other companies. However, it has been an excellent performer over the last five years, returning around 48%, easily outperforming FTSE 100 tracker funds that have delivered total returns of around 30%.
What I like about this fund is that it mainly invests in companies that are increasing their dividends (dividend growth investing). This strategy can produce excellent results over time as not only do you pick up higher dividends, but the dividend growth tends to put upward pressure on share prices. Top holdings currently include Royal Dutch Shell, Unilever, and Diageo.
Available through Hargreaves Lansdown with an annual fee of just 0.55%, I think this is a top fund for those seeking capital growth and income.
Lindsell Train UK Equity
Another UK equity fund that has easily beaten the FTSE 100 over the last five years is the Lindsell Train UK Equity fund. Over the last five years, it has returned an incredible 98%, nearly three times the return of the FTSE 100.
I also like the investment strategy here. Portfolio manager Nick Train focuses on high-quality stocks that are highly profitable and have strong competitive advantages and this approach seems to work very well for him. Top holdings are currently Relx, Diageo, and Unilever.
Investors should note that this is a concentrated fund, which does add risk. However, overall, I see it as a good option for those seeking growth. Fees are 0.51% through Hargreaves.
CFP SDL UK Buffettology fund
Finally, check out the CFP SDL UK Buffettology fund. It is the top-performing UK equity fund on Hargreaves Lansdown over the last five years, returning a huge 108%.
This fund is run by Keith Ashworth-Lord of Sanford DeLand Asset Management. As the name of the fund suggests, the portfolio manager takes a Warren Buffett-esque approach to investing, looking for high-quality businesses at attractive prices. However, this fund is unique in that many of the firms it owns are smaller companies that are not in the FTSE 100. Top holdings currently include AB Dynamics, Games Workshop Group, and Bioventix.
Like the Lindsell Train UK Equity fund, this is a concentrated fund which adds risk. Fees are also quite high at 1.19% per year through Hargreaves. However, overall, I think it could be a good pick as part of a diversified portfolio for those seeking growth.
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Edward Sheldon owns shares in Unilever, Diageo, Hargreaves Lansdown and Royal Dutch Shell and has positions in the Franklin UK Rising Dividend fund and the Lindsell Train UK Equity fund. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AB Dynamics, Bioventix, Diageo, Hargreaves Lansdown, and RELX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.