When it comes to mutual funds, all funds are not equal. While some portfolio managers struggle to outperform the market at times, others manage to smash it on a consistent basis and generate incredible returns for investors in the process.
With that in mind, I want to highlight three top funds that have returned 150% or more over the last five years. If you’re looking for a fund for your portfolio, I would definitely check out this trio.
Fundsmith Equity This global fund, which is headed by well-known fund manager Terry Smith, is one of the most popular in the UK right now. And it’s not hard to understand why. Since its launch in late 2010, the performance has been absolutely incredible, averaging an annualised return of nearly 19% to the end of March. Had you invested £10,000 in the fund five years ago, your money would now be worth around £26,600.
What’s Smith’s secret? Well, as I’ve noted before, the portfolio manager has a strong focus on ‘quality.’ Whereas other fund managers tend to focus on ‘value’ or ‘growth,’ Smith focuses on high-quality companies that are highly profitable and have advantages that are difficult to replicate. Top holdings in the portfolio currently include Amadeus IT, Microsoft (NASDAQ:MSFT), and Reckitt Benckiser.
There’s no guarantee that Smith’s style of investing will generate high returns forever. Yet given that Warren Buffett has done pretty well with a similar investment style, I reckon there’s a good chance Smith will continue to outperform. Fees on this fund are 0.95% per year through Hargreaves Lansdown (LON:HRGV).
Lindsell Train Global Equity fund Another portfolio manager that has generated amazing returns for investors recently is Nick Train. His global equity fund is up approximately 164% in the last five years, meaning a £10,000 investment would have grown to around £26,400.
Like Smith, Train tends to invests in a similar style to Warren Buffett – focusing on high-quality companies that generate consistent, high levels of profitability. Top holdings in the portfolio include Unilever (LON:ULVR), Diageo (LON:DGE), and Heineken.
One big advantage of this fund is that it’s listed in the Hargreaves Lansdown Wealth 50 list. This means that Hargreaves has negotiated a special low fee for investors of just 0.51% per year. This rock-bottom fee and the excellent performance track record make it a top fund choice for those looking for global equity exposure, in my view.
Polar Capital Global Technology fund Finally, this fund from specialist investment management Polar Capital is a niche fund that’s focused purely on the global technology sector. That means it’s going to be less diversified overall than other funds and, therefore, higher risk. Yet I wouldn’t let that put you off as over the last five years the fund has returned a staggering 228%, meaning a £10,000 investment would have grown to nearly £33,000.
Top holdings here currently include the likes of Microsoft, Alibaba (NYSE:BABA) Group, and Alphabet (NASDAQ:GOOGL) (Google), meaning that the fund provides investors with exposure to some of the world’s most exciting tech companies.
If the technology sector was to collapse, this fund could struggle. Yet I think the current tech boom could have a lot further to run, so having a small proportion of your portfolio allocated to a tech fund could be a smart move, in my view. Fees through Hargreaves Lansdown are 1.15% per year.
Edward Sheldon owns shares in Unilever, Diageo, Reckitt Benckiser and Hargreaves Lansdown and has positions in the Fundsmith Equity fund, the Lindsell Train Global Equity fund and the Polar Capital Technology fund. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn (NYSE:LNKD), a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Microsoft, and Unilever. The Motley Fool UK has recommended Diageo and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019