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January 12, 2015

Monday Morning Memo: Where Were They Then? Top Fund Performers of 2014, Five Years Ago.

by Jake Moeller.

Lipper’s Jake Moeller examines where top performing funds of 2014 were five years ago. This analysis looks only at funds registered for sale in Europe and all performance data is in local currency.

Reuters/ Srdjan Zivulovic

Reuters/ Srdjan Zivulovic

Humans tend to think in terms of calendar years when time, of course, is a continuum. Indeed much is said this time of year of the previous year’s investment “winners” and “losers”.

Such comparisons are very limited for use in analysing the relative worth of an investment. Fund managers rarely manage money on a one year time horizon, nor do they take into account convenient markings on the Gregorian calendar. Looking at funds (registered for sale in Europe) within popular Lipper Global sectors for the calendar year 2014, reveals the difficulty of rating funds on a one-year metric.

Corporate Bonds

There are 37 funds with a 5-year track record in the Lipper Bond EUR Corporate sector which had first quartile 1-year performance for December 31, 2014. Of those, only nine (26%) appeared in the first quartile for the same time period ending December 31, 2009. For example, Allianz Euro Credit SRI R and MEAG EuroCorpRent were both top 1-year performers in 2014, and fourth quartile performers in 2009. Both are first quartile performers over 5 years to December 31, 2014.

Table 1. Top Ranked Lipper Bond EUR Corporate Funds by 1-Year % Growth to December 31, 2014

Source: Lipper, a Thomson Reuters company.

Source: Lipper

In the Lipper Bond GBP Corporate sector, there are 22 funds with a 5-year track record which had first quartile 1-year performance for December 31, 2014. Of those, only two funds (Insight Investment UK Corp Long MaturitiesBd S Acc and Fidelity Inst UK Long Corporate Bond Inc) had first quartile performance for the same time period, five years earlier.

Equities

In the Lipper Equity Europe sector, there are 171 funds with a 5-year track record in the first quartile for 1-year performance to December 31, 2014. Of these, 53 funds (31%) appeared in the first quartile for the same time period five years earlier and 48 of them (28%) appeared in the fourth quartile. Of the top ten performers in the sector for 2014, six of those funds (including 2nd and 3rd ranked Lansforsakringar Europa Aktiv and Cleome Index Future I C) were in the fourth quartile for the same period 5 years earlier.

In the Lipper Equity U.S. sector, there are 125 funds with a 5-year track record in the first quartile for 1-year performance to December 31, 2014. Of these, only 12 funds (10%) appeared in the first quartile for the same time period five years earlier and 42 of them (34%) appeared in the fourth quartile for the same time period five years earlier, including the top-ranked U.S. fund in 2014, Skandia USA.

Table 1. Top Ranked Lipper Equity U.S. Funds by 1-Year % Growth to December 31, 2014.

Source: Lipper, a Thomson Reuters company.

Source: Lipper

Lipper Leaders & The Need for a Longer View

One-year calendar performance is an interesting metric to provide a snap-shot set of fund rankings as we make our New Year resolutions and undertake our annual detox regimes. However, such rankings are little other than a good headline. It is much more relevant to consider fund performance over longer periods and in terms of risk.

Fortunately, the Lipper Leaders scoring metrics exist to provide investors a ready means to rate funds with more important, medium and long-term performance as well other key metrics such as consistency and volatility.

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