Columbia Threadneedle has issued its latest multi-manager fund watch survey for Q1 2024. Whilst it’s unlikely be a surprise to hear that IA Japan sector tops the bill for a third quarter in a row, it’s interesting to note that only a limited number of funds beat peers on a regular basis
According to Columbia Threadneedle, the percentage of funds delivering top quartile returns over three consecutive 12 month periods fell marginally to 38 out of 1,425 funds in Q1 2024, which equates 2.7% of the selected universe, compared to 39 out of 1,416 funds (2.8%) in Q4 2023, according to the latest Columbia Threadneedle Investments Multi-Manager Fund Watch survey.
Fund Watch, a quarterly survey launched in 2008 by the Multi-Manager team at Columbia Threadneedle, analyses the performance of the funds universe and the IA sectors, providing investors insight into where there is value to be found within active management. The CT MM Consistency Ratio’s historical average range is between 2-4%. A copy of the full Q1 2024 survey can be downloaded HERE.
For a third quarter in a row, the IA Japan sector had the most consistently performing funds with 8 out of 68 funds (11.8%) delivering a top quartile performance as at 31 March 2024. The next best was the IA Global Mixed Bond sector with 6 out of 71 funds (8.5%) achieving this target. At the other end of the spectrum, the IA £ Corporate Bond and the IA £ Strategic Bond sectors each had only one fund deliver top quartile returns consistently and no funds in the IA UK Equity Income sector met this hurdle.
Lowering the hurdle rate to above median in each of the last three 12-month periods saw an increase in the number of funds delivering above median returns consistently. Indeed, all sectors had funds that achieved this hurdle. A total of 258 out of 1,425 funds (18.1%) were above median compared to 249 out of 1,416 funds (17.6%) in Q4 2023. Once again, the IA Japan sector had the most consistently above average funds with 24 out of 68 funds (35.3%) delivering above median returns. The next best was the IA UK Smaller Companies sector with 10 out of 44 funds (22.7%) qualifying. The IA North America sector was the worst ranked sector with 15 out of 139 funds (10.8%).
Year on year comparison
Comparing Q1 2024 against the same quarter of last year paints a more positive picture. In Q1 2023, from a universe of 1,261 funds, only 23 funds (1.8 %) delivered consistent top quartile returns over three years to 31 March 2023, falling just below the historical average range of between 2-4%, and 136 funds (10.8 %) delivered above median returns consistently. The 12 main IA sectors all had funds that met the above average consistency hurdle.
Adam Norris, Investment Manager in the Multi-Manager team at Columbia Threadneedle Investments, comments:““Consistency was remarkably, well…. consistent between quarters, despite the large rally in equity markets. Once again, Japan was a rich hunting ground for solid fund performance mainly driven by corporate reforms continuing to unlock shareholder value within Japanese equities. Interestingly, with US equities comprising ever larger parts of global portfolios, it is disappointing to see a lack of consistent US equity funds.
“Looking forward, we see continued support for equity markets with company earnings remaining relatively resolute. It is worth remembering that optically expensive markets can remain so for some time. Alternative assets are currently presenting some tremendous value, such as investment trusts with high dividend yields supported by strong cash generation, therefore, investors are being paid to be patient for a re-rating. Unfortunately, corporate bond spreads are once again reaching multi-year lows, limiting future excess returns.
“All eyes remain focused on central banks and their assessment as to whether we are at acceptable levels of inflation once again, or whether it is too soon to cut interest rates when the underlying strength of the economy remains robust.”
Other highlights from the report included:
- 14 of the 56 IA sectors were negative, with the worst performing being the Latin America sector at -3%. Many of the other negatively returning IA sectors were fixed income categories as central banks pushed back on the amount of interest rates cuts priced in the market.
- The IA Technology and Telecoms sector was the best performing sector of the quarter, driven by performance of the former rather than the latter! Runner up was the IA North America sector, with many of the technology behemoths residing within US market. Third was the IA Japan sector, continuing its stealth outperformance due its significant corporate reform agenda.
- The GQG Partners US equity fund topped the Q1 2024 leaderboard delivering returns of 23.4%, whilst the Amati Strategic Metals fund was the worst performing fund, down -14% despite the buoyant price of gold.
- UK Renewable and Infrastructure exposed funds populated much of the fourth quartile rankings with the London-listed investment company market remaining out of favour with investors.
