- We highlight 50 standout options across major regions and asset classes
- The latest update sees us diversify the choice by investment style and address some idiosyncratic fund challenges
Picking a good active fund is easier said than done. Some are hard to analyse, few provide a consistent level of outperformance and to cap it all off there are thousands of options available to UK investors. But the best have rewarded their backers much more richly than the average passive fund – while also serving as a more diversified and less time-intensive form of investing than exclusively picking shares.
If that explains the enduring allure of the active fund, parsing all the options available seems like an impossible task. Our yearly top funds list seeks to help with that problem by providing a concise selection of options that we view as the most appealing plays on different equity regions and asset classes. While this is a concise list of just 50 funds and certainly not exhaustive, it could serve as a useful starting point for your own research into the portfolios on offer.
The process of choosing an active fund can itself be nuanced and highly idiosyncratic, and our selection reflects that. We have consulted with a nine-strong specialist panel on the state of last year’s list, considered the options and asked which names should stay in, exit or enter. Multiple factors can determine whether an active fund is appealing, from its investment theme to the team and process, the fund’s size, charging structure, track record and the risks being taken. For individual investors, it's important to ask whether a fund is targeting the desired outcome for your portfolio, and whether its process seems up to scratch.
Changes to this year’s list
While they all have individual preferences, our panellists broadly agreed that most of the 2021 list look in good shape, despite the struggles that all investors have faced over the past year. However, some issues have emerged: the imminent departure of a veteran fund manager with a highly distinctive approach has prompted us to drop a popular Japanese equity fund from the list, while concerns about a European fund paying dividends from capital has triggered its ejection. We have also made cuts where two funds seem to be doing a similar job to one another.
A more structural change has been to seek a greater range of investment styles where possible. Recent market conditions have made it painfully clear that growth stocks can fall out of favour, and that some portfolios are overly reliant on the continued success of that particular style. Some parts of our list have been especially focused on growth and quality managers, prompting us to introduce value options where necessary. While markets could well swing back in favour of growth in a sustained manner over time, we see merit in highlighting options that can complement each other in a portfolio. However, in categories such as global growth, as the name implies, we have stuck with funds that mainly have a growth focus – albeit here individual funds can differ substantially in other ways.The 11 changes made to the list this time around have not altered its overall structure, with equities making up much of a selection broadly focused on risk assets. Equally, bonds and alternative asset classes remain fairly well represented in acknowledgement of investors who seek diversification or yield outside of equity markets. One cosmetic change we have made, for the sake of simplicity, is to group the funds into broad categories such as growth equity, equity income and alternatives.
As per usual it’s worth stressing that these funds may not suit your individual goals and that the list should merely serve as just one part of your initial research. While we view these funds as solid options there is no guarantee they will do well in the future. Our focus on funds with different styles can even mean one selection in a given category could well underperform while the other flourishes.
The constraints of running a 50-strong list also mean that lots of good funds fail to appear. Investors should certainly not overlook a fund because of its absence from the list, or even because it has exited our selection. Finally, those who do prefer to combine active funds with trackers may wish to review the options in our 2022 Top 50 ETFs list, published in July.
