Neil Woodford’s Equity Income fund currently holds assets of around £7bn. That’s a sizeable amount of money, suggesting that many Brits have trusted the well-known portfolio manager with their retirement savings.
Yet in recent years, Woodford’s performance has been underwhelming, to say the least. According to figures from Hargreaves Lansdown, over the last year, Woodford’s fund has returned -11.3%. Over three years, it has returned just 0.9%.
Are other portfolio managers generating better returns for investors? Absolutely. Here’s a look at three that are outperforming Neil Woodford’s Equity Income fund by a wide margin.
Fundsmith Equity
First up, Fundsmith Equity fund, which is managed by another well-known portfolio manager, Terry Smith. This is a popular option among UK investors and looking at its performance figures, it’s not hard to see why. Over one and three years, it has returned 11.6% and 76.3% respectively. Over five years, it has returned almost 140%. That’s an excellent return.
Unlike Woodford’s fund, which mainly invests in UK stocks, Fundsmith Equity is a global operation. For example, top holdings include Paypal and Microsoft, which are both listed in the US. Smith takes a long-term approach to investing and looks for ‘resilient’ businesses whose advantages are difficult to replicate. The fund is significantly more concentrated than Woodford’s, in that it only holds around 30 stocks, whereas Woodford’s holds around 125.
Ongoing charges for this one are a little higher than the fees on Woodford’s fund (0.97% vs 0.6% through Hargreaves Lansdown), but for the performance generated, that seems to be a small price to pay. For those looking to diversify internationally, this fund could be a good choice, in my view.
Old Mutual UK Mid Cap
Another pick that has generated robust returns over the last few years is the Old Mutual UK Mid Cap fund. Over one and three years, it has returned 11.7% and 53.8% respectively.
As its name suggests, it focuses on the mid-cap area of the market, investing around 80% of its capital in FTSE 250 stocks. Top holdings currently include Boohoo.com, Fevertree Drinks and Ashtead Group, so you can see there’s a strong focus on growth.
As I noted last week, mid-cap shares can often produce higher returns than large-cap shares over the long term, therefore, this area of the market is definitely worth considering if you’re aiming for higher returns. For those looking for FTSE 250 exposure, this fund could be an excellent choice. Fees are reasonable at 0.78% per year.
Marlborough Nano-Cap Growth
Lastly, take a look at the Marlborough Nano-Cap Growth fund. Over one and three years, it has generated super returns of 20.4% and 71% respectively.
Managed by expert stock picker Giles Hargreave, it invests in some of the smallest companies listed in the UK, with a particular focus on companies with market capitalisations under £100m. This means that it’s most likely not going to be suitable for risk-averse investors, as smaller companies can be significantly more volatile than larger one. However, for those interested in small-cap exposure, it could certainly be worth a look. Fees are just 0.66% per year.Â
Of course, these are just three funds that have performed well in recent years. There are many others. It can pay to be diversified when investing in funds, in order to ensure that you’re not too exposed to one particular fund manager, should they underperform.