As you may be aware, earlier this week we released our annual Vintage Report. To get your copy of the report just click below, no email address or personal details are required.
In truth, we don’t particularly enjoy doing the Vintage research every year. Not because the research and feedback we receive aren’t always fascinating, but rather the true results of the Report highlight something perhaps more sombre.
Most of the investment industry just isn’t good enough.
Yes, the report is based on unit trusts only, so perhaps it is unfair to label the whole industry as ‘not good enough’. We are hoping to soon integrate a wider universe of investments into the report, such as investment trusts and ETF’s.
What do you mean “not good enough”?
To achieve a Vintage rating, a fund must be in the top 40% of performers in its own sector 60% of the time. The “time” is the 120 overlapping 6-monthly periods in the last 10 years with a higher weighting being given to more recent periods.
Basically – be a bit better than average, for just over half the time.
94% of funds failed to beat this benchmark.
94%.
We exclude funds that are less than £50m in size, but don’t actively exclude funds based on their age. The nature of Vintage Fund Ratings is that funds need to have been around for a few years to build up a track record before they can get a Vintage rating.
Let’s go back a step, what goes into our Vintage Rating System?
Our view is that any best-buy list or fund rating system must be supported by a tight process.
More precisely, these are the must-haves for an effective process to identify outstanding funds:
- Straightforward to identify top-rated funds
- The underlying process must be objective, clear and understandable.
- It must be easily repeatable.
- There must be a volume of long-term evidence of it generating extra growth.
These are straightforward requirements, and our Vintage Ratings meet these criteria.
These ratings are not seat of pants – they are objective (see below). It’s not fund recommendation by proclaiming "because I'm an expert".
There is no scope for Vintage Ratings to be skewed by fund managers with a good story.
Our Vintage Ratings are both objective and measure long-term quality.
OK, but who are Vintage Ratings for? Should I be following them?
In summary, Vintage fund ratings are a great resource for investors who do not want to review every 3 or 6 months, like our Dynamic Ratings suggest.
But remember, you should not adopt a “buy-and-forget” approach with these funds (or any of your investments) because inertia is one of the biggest roadblocks to you making the best possible gains.
Results? They’re Impressive
We’ll let you indulge in the wider report for the full results, but the below highlights just how impressive our Vintage Ratings can be. Below is how they work for the UK All Companies sector.
Both Top 1 and Top 3 portfolios outpaced the sector average, both with less risk.*
The extra growth is greatest in this sector compared with the other two UK sectors.
- The best is the Vintage Top 1 portfolio, up almost twice the sector average (457% vs 238%).
- Vintage Top 3 portfolio is up 392%.
- Both portfolios are less risky (less volatile) than the sector average.
- The best performing Vintage Top 1 portfolio has a Worst Month that’s nearly half the sector average (10.1% vs. 18.4%).
|
|
Total Return
|
Annualised
|
Worst Month
|
Worst Year
|
|
Vintage UK All - Top 1
|
457.3
|
11.8
|
-10.6
|
-14
|
|
Vintage UK All - Top 3
|
392.3
|
10.7
|
-10.1
|
-14.6
|
|
IA UK All Companies sector avg
|
238.5
|
8.4
|
-18.4
|
-20.1
|
*Top 1 means picking the single best Vintage rated fund in its sector and holding it for a year, then swapping to the new highest Vintage rated fund 12 months later. Same process applies for the Top 3 portfolio, but this time picking the top 3 rated funds from the sector.
Have a look at the report for yourself below, we’d love any feedback or questions you may have on it.
Ps – if there are one or two funds that you are curious what Vintage Rating they have, just ask us and we’d be more than happy to share. Just remember we only do this analysis on unit trusts, so we can’t provide any figures for investment trusts or ETF’s.