Holding an active fund can sometimes feel like a thankless task. Many have failed to outperform markets in both good times and bad, and with thousands in existence the choice on offer can seem overwhelming. But there are still rewards to be had: the best have outperformed markets notably over time and do more than enough to distinguish themselves from a passive alternative.
Rifling through the many active funds available on an investment platform may seem a daunting task: our yearly IC Top 50 Funds list seeks to help by providing a concise selection of the most appealing options in different regions and asset classes. As per the above, we look for those funds that differentiate themselves notably from their tracker fund competitors, be that via a stellar investment process or the ability to look beyond the stocks and sectors that dominate especially concentrated markets such as the US. Such funds should deliver solid performance over longer timeframes, although even a bad patch of returns is sometimes worth tolerating.
Our own process continues to combine the qualitative and the quantitative. We have consulted with an eight-strong specialist panel on the state of last year’s list, considered the options and asked which names should stay, exit or enter. Many factors can determine whether an active fund stands out, from its theme to the team and price, its size, charging structure, track record and the level of risk taken. And it makes sense to always ask whether a fund is targeting your desired outcome and whether its process looks up to scratch.