Merryn's Blog

The seven greatest funds in the world

To distinguish between fund managers who are skillful as opposed to just lucky, you have to look at funds that have made serious returns for 20 years or more. Here's a table that lists them.

Earlier this week, I wrote about a group of funds that have managed to grow at a compound annual rate of more than 20% for 20 years or more. The list comes from Chris Clarke at Lawrence Clarke and it is his definition of what makes a great fund.

Funds come and go and you will find all sorts with fabulous records forone year,two years and evenfive years. But, as I have written here many times, over periods like that, how are we to distinguish luck from skill?

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

As Chris puts it, "if you happen to launch a fund (at the right time) that is optimised on a certain set of market conditions (an equity bull market, a period of low volatility, a one off bet on the collapse of the US mortgage market), then you may well be lucky.

"Admittedly it may be very smart of the person launching the fund to want to trade a certain set of market conditions, identify them, and launch his/her fund, make the money and disappear.

Advertisement
Advertisement - Article continues below

"But, unfortunately, this is not normally what happens. What normally happens is a fund is launched, makes great money for a few years, and investors rush into this new vehicle, which has apparently discovered the holy grail of investment or trading. This performance may then wane substantially in many instances, the fund loses all its prior gains and, in some cases, may blow up spectacularly".

So if we want to have a chance of identifying a great fund, we need to define it as being one that has "consistently made money through all sorts of market conditions for years and years, decades and decades". That doesn't mean that it won't have had bad periods, just that it is inherently robust.

Clearly, there aren't many of these funds around. But there are some. The list is below. You will note that Warren Buffett is included on it even though he is not a fund manager in the true sense of the word buying and selling entire companies is different to trading in the financial markets.

That said, however he does it (and whether he just has long-term luck or not), his returns do mark him out as the manager of a great fund. For more on all this you can contact Chris onchris@lawrenceclarkeim.com.

Fund / VehicleYear Strategy AUM CAGRMax drawdown
Eckhardt Trading CoStandard Program(USD)1990Trend follower$500m22.34%29.08%
Hawksbill Capital Management - Standard Program1988Trend follower$74m22.11%61.78%
EMC Capital Management - Classic Program1987Trend follower$142m21.75%45.16%
MJ Walsh & Co. - Standard Program1985Trend follower$118m21.14%43.04%
*Blenheim GL Markets LP1986Discretionary$2,535m22.06%41.2%
Tudor BVI Global Fund1986Macro**$7,650m20.67%17.07%
Berkshire Hathaway(Per share book value)1965Long-only equities?20.3%9.60%
AUM=assets under management; CAGR=compound annual growth rate

Source: Lawrence Clark

Advertisement
Advertisement - Article continues below

* Blenheim GL Markets LP No data available since 2010 hence this data is 1986 2010.

** Tudor BVI Global Fund Macro? Anyone can watch the Paul Tudor Jones movie online or read an interview with PTJ in Market Wizards (Jack Schwagger) These sources of information strongly indicate to me that he uses his own ideas for a trade entry (as opposed to a simple trend following method chosen from the many that prevail) and everything after that is about as "trend following" as it gets ie, sitting on winners and letting them ride, getting out of losing positions quickly, risking a small amount of capital per trade always having a plan before the trade is entered. Risk and money management are key!

Advertisement

Recommended

Visit/504054/the-power-of-mean-reversion
Funds

The power of mean reversion

When it comes to investing in funds, don’t chase the top performers – look for the cheapest ones.
1 Apr 2019
Visit/503809/investing-in-funds-the-most-important-number-to-look-at-before-you-buy
Funds

The most important number to look at before you buy any fund

Many investors get distracted by past performance when they buy a fund. But there’s something else to consider that will have a much bigger influence …
22 Mar 2019
Visit/520115/investment-trusts-the-cinderella-of-investment-arrives-at-the-ball
Funds

Investment trusts: the Cinderella of investment arrives at the ball

Investors should look beyond the market noise of a single year and examine the bigger picture. Max King explains what we can learn from 25 years of in…
8 Jan 2020
Visit/520292/passive-investing-etfs-wont-cause-the-next-market-crash
Stock markets

The boom in passive investing won’t cause the next crash

Passive investment funds such as ETFs are now such a fundamental part of financial markets that some people worry that they will spark the next crash.…
7 Jan 2020

Most Popular

Visit/investments/stocks-and-shares/share-tips/600636/class-acts-going-cheap-buy-into-europes-best
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020
Visit/currencies/600665/currency-corner-new-zealand-dollar-kiwi-vs-us-dollar
Currencies

Currency Corner: how is the New Zealand dollar doing against its US counterpart?

The New Zealand dollar has been doing well against the US dollar in recent months, but has started to wobble a little. Is it still a buy? Dominic Fris…
20 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600641/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Visit/investments/property/house-prices/600638/uk-house-prices-may-be-heading-for-a-boris-bounce
House prices

UK house prices may be heading for a Boris bounce

The latest survey of estate agents and surveyors from the Royal Institution of Chartered Surveyors is "unambiguously positive" – suggesting house pric…
16 Jan 2020