When it comes to performance, not all equity funds are equal. Some fund managers are able to consistently deliver fantastic returns for investors. Others, however, regularly underperform.
With that in mind, I want to highlight the three UK equity funds on the Hargreaves Lansdown platform (from the UK All Companies sector) that have delivered the highest returns to investors over the last five years. All three of these funds have outperformed broad market indexes, such as the FTSE 100 and the FTSE All-Share, by a wide margin.
Top fund performance
At the top of the list is the Chelverton UK Equity Growth fund. It’s returned 85% over the five-year period, which is an excellent performance. By contrast, the FTSE 100 index has returned a total of -3%, while the FTSE 100 All-Share has delivered a return of about -2%.
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One reason Chelverton has outperformed is that it has a focus on small- and medium-sized UK companies outside the FTSE 100. These types of companies tend to grow faster than large-cap businesses. It also focuses on high-quality companies that have competitive advantages and are cash generative. This approach reduces the risk of big losses. According to Hargreaves Lansdown, the top holdings are currently Future, Volution Group, Elementis, Dotdigital, and SDL.
Overall, this fund has delivered very impressive returns since its launch in October 2014. I see it as a solid choice for growth investors with a higher tolerance for risk. Fees are 0.94% per year through Hargreaves Lansdown, plus platform fees.
Warren Buffett-like approach
In second place is the CFP SDL UK Buffettology fund. This has delivered a return of 66% over the last half-decade. That equates to an annualised return of about 10.7%, which is a top performance given the circumstances.
Like the Chelverton, Buffettology isn’t your average UK equity fund. Here, portfolio manager Keith Ashworth-Lord invests with a Warren Buffett-like approach, focusing on companies that have strong competitive advantages. He also focuses heavily on the small-cap area of the market, although the fund does hold some FTSE 100 giants. Top holdings, according to Hargreaves, are currently Games Workshop Group, Liontrust Asset Management, Dart Group, London Stock Exchange and AB Dynamics.
For risk-tolerant UK growth investors, I see this fund as another solid pick. Fees are 1.19% through Hargreaves.
Recovery situations
Finally, in third place, is the Slater Recovery fund, which is managed by Mark Slater. In terms of performance, this fund has delivered a total return of 53% over the last five years.
This is another unique UK equity fund. Here, the portfolio’s core is invested in high-quality companies with low valuations relative to earnings growth. However, the fund also invests in recovery situations, and stocks trading at a discount to their asset value.
Specifically, Slater likes companies with strong balance sheets, powerful competitive positions, and high returns on capital. Current top holdings are Future, Codemasters, Alliance Pharma, IWG, and Tesco, according to Hargreaves Lansdown.
Given its unique approach, I think this fund could be a good way to add diversification to a portfolio. Ongoing fees are 0.83% per year through Hargreaves Lansdown.
