Category: How we build the Wealth Shortlist
How our research has performed
We created our fund lists to help people choose from the bewildering number of funds available. Over the years, we’ve refined our process as we adapt to meet to our client needs, industry requirements and market conditions. We moved from the Wealth 150 to the Wealth 50, and to the Wealth Shortlist in 2020.
The majority of our analysts’ fund choices have beaten their sector average and benchmarks during their time on our fund lists. Not every fund has, it’s impossible to get every decision right. Past performance is not a guide to the future.
Performance by sector
The figures show the average performance of funds while they’ve been on the Wealth 150, 50, or Shortlist, broken down by sector. We compared each fund’s performance against their most appropriate benchmark index and sector average, then took an average for each sector and the Wealth 150, 50, or Shortlist as a whole. The sectors should not be compared as the time periods, benchmarks and number of funds in each sector vary.
| IA Sector | Average Wealth list Performance |
Performance of Benchmark index |
Performance of IA Sector average |
|---|---|---|---|
| Wealth 150/50/Shortlist | £1,638 | £1,561 | £1,510 |
| UK Smaller Companies | £2,327 | £1,677 | £1,817 |
| Asia Pacific Ex Japan | £2,105 | £2,077 | £1,949 |
| European Smaller Cos | £2,055 | £2,067 | £2,002 |
| Europe Excluding UK | £1,943 | £1,792 | £1,744 |
| China/ Greater China | £1,925 | £1,564 | £1,673 |
| Global Emerging Mkts | £1,865 | £1,795 | £1,690 |
| North America Smaller Companies | £1,864 | £2,007 | £2,117 |
| UK All Companies | £1,734 | £1,596 | £1,508 |
| Global | £1,731 | £1,672 | £1,562 |
| Mixed Investment 40-85% Shares | £1,727 | £1,700 | £1,502 |
| UK Equity Income | £1,599 | £1,581 | £1,523 |
| Flexible Investment | £1,582 | £1,664 | £1,741 |
| Japan | £1,550 | £1,592 | £1,493 |
| GBP Strategic Bond | £1,533 | £1,451 | £1,385 |
| Technology & Telecoms | £1,523 | £1,588 | £1,586 |
| GBP Corporate Bond | £1,411 | £1,399 | £1,360 |
| GBP High Yield | £1,313 | £1,371 | £1,292 |
| Global Bonds | £1,281 | £1,165 | £1,214 |
| Global Equity Income | £1,232 | £1,322 | £1,300 |
| Specialist | £1,229 | £1,271 | - |
| Mixed Investment 20-60% Shares | £1,224 | £1,279 | £1,187 |
| Mixed Investment 0-35% Shares | £1,186 | £1,178 | £1,164 |
| North America | £1,114 | £1,184 | £1,147 |
| Absolute Return | £1,111 | £1,158 | £1,111 |
| Property | £948 | - | £1,129 |
Past performance isn’t a guide to the future. Source: HL, to 30 April 2021
How have these figures been calculated?
We assume that £1,000 has been invested into every fund on the Wealth 150/50/Shortlist for the time it was on the list, then calculate an average for each sector. The average time a fund has been on the list is just over five years – the calculations are not time-weighted. As tracker funds aim to copy their benchmark rather than outperform they’ve been excluded from the calculations.
We’ve also shown the average value of an appropriate benchmark index and the sector. For example, the average Wealth list fund in the UK All Companies sector turned £1,000 in to £1,734. The funds’ respective benchmarks made £1,596 over the same time periods. Wealth list funds, on average, outperformed by £138.
The two historical selections made within the IA Property sector have been excluded from the benchmark comparison. We don’t think it’s possible to apply a fair benchmark in the property sector as it’s a very diverse asset class. We have also excluded the sector performance comparison in the IA Specialist sector, since the funds here can vary greatly.
Past performance isn’t a guide to the future. Investments fall as well as rise in value so investors could get back less than they put in.
What's gone well?
We’ve found some great UK fund managers over the years and we’ve backed them for a long time. Some have uncovered great growth opportunities investing in smaller companies, others have mastered the art of equity income investing.
Europe’s also been a rich hunting ground. Europe has faced several economic headwinds over the past decade. But the continent’s home to plenty of great companies and a small number of exceptional fund managers have helped us do well in this sector.
Asian and emerging markets are vast and exciting. There are plenty of opportunities, but also higher risks. Not many fund managers have been successful in this area, but we’ve found a few with long track records and excellent potential. This means that overall our fund selections have done well.
What hasn’t gone well?
Our analysts’ selections of global income funds have fallen short of global market index and tracker funds. The US accounts for well over half of the world market, so the relative performance of global funds is often determined by their US exposure – too little when the US is performing well can leave performance lagging behind. This has happened to lots of funds in the global income sector in recent years, many US firms favour share buybacks over dividends, making them unsuitable for an income portfolio.
In the mixed investment sectors our selections have outperformed their peer groups, but in Mixed 20-60% they’ve underperformed their assigned benchmark index. This is usually because the indices have a high proportion of government bonds, a market where continued strength has wrong-footed active managers for years.
Our North American selections have also failed to outperform the benchmark and peer group due to a value bias in the past, which has been out of favour in recent years. Our North American selections are now more style balanced.