While there is significant choice for ways to invest around the world, the number of actively managed funds that have comfortably beaten the market is much smaller.
There is no guarantee this elite group of funds will always outperform, yet it can be useful to explore which ones have shone on a long-term basis. Funds can have a good year, but to keeping it up is much harder. Investors should look for funds that have true skill rather than luck.
To help with your research, we have run the numbers on the top active funds by 10-year performance record for various investment regions around the world.
An active fund is one where a fund manager or team of managers make the investment decisions, rather than a passive fund which simply tracks the market rather than tries to beat it. We have focused on funds available to retail investors and have excluded investment trusts.
Global funds
Before we drill down into key regions, let us look at funds that invest in shares globally. The top performer in the Investment Association global equity sector over 10 years is T. Rowe Price Global Focused Growth Equity, with a 399% return. If you had invested £1,000 in this fund 10 years ago, it would now be worth £4,990 excluding any investment platform charges. The MSCI ACWI index – a popular benchmark for the global stock market – returned 259% over the same period in pounds sterling.
T. Rowe Price says it looks for companies on the side of change. That means names with the potential to make better returns in the future and whose shares trade at an attractive valuation. The portfolio includes a mix of popular tech names ranging from chip giant Nvidia and Google’s parent company Alphabet to Taiwan’s Delta Electronics which provides components for AI data centres, as well as names from other industries including deodorants-to-washing powder seller Unilever.
MS INVF Global Opportunity is the second best performing global active fund on a 10-year basis. The Morgan Stanley Investment Management fund looks for companies it believes to have sustainable competitive advantages and whose shares are not expensive. There have been years where this fund has underperformed the market by a large amount, countered by examples of years with significant outperformance. This volatility suggests that anyone considering the fund needs to be comfortable with large up and down swings in value. Facebook owner Meta, music streaming platform Spotify, and food delivery platform DoorDash are among the fund’s top holdings.
US opportunities
The US stock market has been one of the best places to make money in recent years. While there is a debate around whether valuations are now too rich and if the market is ripe for a pullback, investors with a long-term horizon might still be interested to learn which US-focused funds have risen above the crowd.
Simply owning a US tracker fund would have delivered attractive gains over the past decade, with the S&P 500 returning 337% including dividends. A handful of active funds have done ever better, led by T. Rowe Price US Large Cap Growth Equity with a 443% total return. Someone who invested £1,000 in this fund 10 years would now have a pot worth £5,430, excluding investment platform fees.
T. Rowe Price says companies with ‘explosive’ earnings growth may grab investors’ attention, but it believes these are rarely long-term winners. Instead, it prefers to look for companies with potential for durable growth, are not all concentrated in the same area, and have the right qualities to each year to generate more earnings and cash flow than the last.
The T. Rowe Price US fund is big on tech and financial services and has MasterCard and Block in its top 10 holdings. Further down the list are diversified names such as weight-loss drugs group Eli Lilly and streaming platform Netflix.
Asia, UK, and Europe
For those seeking Eastern opportunities, Fidelity Asia is the top performer in the IA Asia Pacific excluding Japan sector, with a 277% return. A £1,000 investment 10 years ago would now be worth £3,770, excluding investment platform charges.
In comparison, the MSCI AC Asia Pacific ex Japan index – a popular stock market benchmark for this region – returned 212% over 10 years in pounds sterling.
In the UK, Man Income beats the crowd with a 169% return over 10 years versus 134% from the FTSE All-Share index of UK shares. To put that into monetary terms, a £1,000 investment in Man Income 10 years ago would today be worth £2,690. When looking for investment opportunities, the fund focuses on financial strength and cash flow to avoid weak companies and to spot more robust ones.
For those looking across mainland Europe excluding the UK, Premier Miton European Opportunities topped the 10-year leaderboard with a 266% return, turning £1,000 into £3,660. Unlike the other funds discussed in this article, the Premier Miton fund focuses more on medium-sized companies rather than large ones. It is incredibly patient with holdings which means there is low turnover in its portfolio.
You might think countries or regions with the biggest returns over 10 years are the best places to put your money. Just consider the importance of diversification and spreading the risks across different areas. It is common to see parts of a portfolio thrive while other parts lag, and this dynamic is fluid. That implies it is worth looking more broadly rather than the specific part of the world that has done the best.
Ways to look for funds
The funds discussed in this article all shine from a long-term performance perspective. Strong returns help them to stand out from the crowd, yet there are other ways to look for funds. AJ Bell has a free tool that lets you filter the funds universe based on various criteria including management style, geographical focus, risk rating and dividend yield.
You can use this screening system to rank funds by Morningstar rating, which considers how each fund has performed relative to similar investments after adjusting for risk and charges. Morningstar is a financial data and fund research specialist.
Alternatively, AJ Bell’s investment team has done its own research of the market and created a Favourite funds list. This is a shortlist of funds our experts believe have a good chance of delivering their investment objectives over the long term.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
