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  • How we analyse funds

    We explain what it takes for a fund to make the Wealth 50 list.

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

    There are more than 3,000 funds available to UK investors. Our analysis helps narrow the field so investors can choose from a shorter list of what we think are the best funds available.

    Decided you would like to invest in emerging markets? We have four preferred funds in the sector. Want exposure to European stocks? We have five on the list.

    No fund on the list will rise in value every year. Instead we aim to pick funds that can help you build a diversified portfolio, with different drivers of returns, that – when blended together – can perform well through the market cycle.

    We do not take payment for promotion

    It's important to make clear we never take payment or commission for funds to appear on our favourite funds list. We only look at performance potential.

    Ultimately, we only do well if our clients do. We earn exactly the same platform fee for every single fund. If a fund does well, your investment grows, the fund gets bigger and that is better for us too.

    Quantitative analysis

    When it comes to our analysis, a fund manager's track record is the first port of call. Not just a performance chart, that only tells a part of the story. We need to see the individual shares or bonds they’ve invested in over the course of their career. We then transform this data so that we can use it within our own, one-of-a-kind quantitative analysis system.

    We need this data to cover at least seven years, and ideally ten. We’re strict when it comes to experience because markets are cyclical, and these cycles on average last about seven years. We want to see whether a fund manager sticks to their process, particularly when the way they invest isn’t in favour. Often, this separates the ordinary from the extraordinary.

    No manager is infallible though, and no-one can make the right calls every time. When they get it wrong, the fund will fall in value.

    Ultimately we want to find managers with great stock-picking talent – those who invest in great companies, even if they're in an area that's out of favour at the moment.

    We compare a fund manager’s track record not just against their benchmark index or peers. We use our bespoke six-factor analysis; determining how a fund’s holdings size, or dividend yield has contributed to performance.

    We also analyse stock selection on a geographical and sector basis; how has that particular retail stock contributed to a fund’s performance over and above the average retail stock in the sector?

    We like to see positive stock selection when analysing fund managers’ track records. Our experience tells us managers with consistently good stock selection, through a market cycle, have better prospects of outperforming over the long term.

    Qualitative analysis

    Meeting fund managers is a key part of our process. We meet more than 175 fund managers a year, totalling an average 300 meetings across the team.

    We cross reference what we’ve learnt from our analysis with what they have to say. Finding out about a manager’s philosophy and process is vital. If a fund manager has underperformed the wider market, but it is because they have stuck to their process that is no bad thing.

    We also want to understand their background and personality, what motivates them, and how they're incentivised. We like fund managers who do well as their investors do well – who are incentivised in a way that is aligned with long-term performance and rewarded over that time. Fund managers who are invested in their own funds.

    We meet managers several times before even considering the fund for the Wealth 50. And once a fund's been added we continue to analyse and assess it. It’s quite possible we know more about these funds and their managers than anyone else in the country.

    The voting system

    Each part of our process is designed to make sure the Wealth 50 is full of fund managers who can help you make the most of your money. For a new fund to make it onto the Wealth 50, following the necessary analysis, there is an independent vote by our Fund Research team.

    The inclusion or removal of funds on the Wealth 50 can either be taken as part of the twice-yearly sector reviews or on an ad hoc basis. On any day, any member of the team can propose a change to the Wealth 50 list. Any proposed change must be seconded, challenged and voted on by the Fund Research team. Every member of the team has an equal vote.

    If this results in a change to the Wealth 50, this is immediately communicated to clients who hold the relevant fund.

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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