Thomson Reuters Lipper’s Jake Moeller looks at the 2015 performance of large equity funds in Europe. Funds examined here include only actively managed cross-border funds registered for sale in Europe. All performance figures are for one year to December 31, 2015 (in local currency), and fund sizes are as of November 30, 2015.

There are no hard and fast rules about when a fund becomes too big to manage–it hits a “capacity constraint” as it is known. It is left to an individual fund house to decide when it should close or “soft close” a fund (i.e., make the entrance costs of the fund comparatively unattractive) in order to allow a manager the ability to generate alpha.

Given the argument that larger funds become unwieldy and less able to outperform, it is worth examining how some of the larger funds in popular European mutual fund sectors fared for 2015.

U.K. Equity Funds

Of the 442 funds in the Lipper Equity UK Income, Equity UK, and Equity UK Small-& Mid-Cap sectors available for sale in Europe, there were 42 funds with assets in excess of £1 billion. Of these, 19 (45%) returned first- or second-quartile returns for 2015. The two largest funds generated first-quartile returns: £13-billion Invesco Perpetual High Income Fund returned 9.3%, and £8-billion Woodford Equity Income Fund returned 16.3%. The worst performer with assets over £1 billion was Schroder Income Fund, which returned a negative 7.3%.

Table 1. Top Ten Largest U.K. Equity Funds with One-Year Performance

2016 05 01 jm1

Source: Thomson Reuters Lipper, Lipper for Investment Management.

Smaller-capitalization funds generally have a lower capacity constraint than their larger-cap counterparts. Of the U.K. small- and mid-cap funds with assets over £1 billion (there were six) only BlackRock UK Special Situations Fund (£1.1 billion) had submedian performance (+4.8%). The largest fund–Old Mutual UK Mid Cap Fund (£2.1 billion)–returned a top-quartile 23.8% for the year.

European Equity Funds

Of the 1,200 European equity funds available for sale in Europe within the Lipper Equity Europe, Equity Europe ex-UK, Equity Europe Income, and Equity Europe Small- & Mid-Cap sectors, there were 80 funds with assets in excess of €1 billion. Of these, 47 (59%) had first- or second-quartile returns for 2015. The largest fund–Fidelity Funds European Growth Fund (€8.2 billion)–returned a third-quartile 8.7%. The second largest fund–Allianz Europe Equity Growth (€8.1 billion)–returned a first-quartile 19.3%, and the third largest fund–Invesco Pan European Structured Equity Fund (€7.3 billion)–returned a second-quartile 15.2%.

Of the 11 smaller-capitalization European equity funds with assets over €1 billion, all managed to return first- or second-quartile performance for the year. The largest–Threadneedle Pan European Small Companies Fund (€2.4 billion)–returned 20.2%.

Table 2. Top Ten Largest European Equity Funds with One-Year Performance

2016 05 01 jm2

Source: Thomson Reuters Lipper, Lipper for Investment Management.

Analysis of one-year calendar performance should be considered a small part of a much more thorough analysis of any-sized mutual funds. However, this snapshot shows that for 2015 at least, a number of large European and U.K. equity funds–particularly in the smaller-cap space–managed to generate decent returns.

Jake Moeller

Jake joined Thomson Reuters Lipper in 2013 as Head of UK & Ireland Research. He has over eighteen years experience as an expert in mutual fund research, fund-of-funds portfolio management and asset allocation strategies. He spent six years managing the fund-of-funds suite and guided fund platform at AIG and has been a mutual fund research specialist for Lloyds Banking Group, Towry and the Commonwealth Bank of Australia. Jake is a Chartered Member of the Chartered Institute of Securities & Investment (CISI) and a Senior Fellow of the Financial Services Institute of Australasia (Finsia).

Website: lipperalpha.financial.thomsonreuters.com/contributor/jake-moeller/


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