HEAD-TO-HEAD: Investec vs MFS

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While both funds outperformed their benchmark, the MSCI Europe Index, over the past three years, the Investec fund has delivered higher three-year and one-year returns than the MFS fund. It also outperformed the MFS fund in each calendar year since 2012.

The consistent outperformance of Investec’s product is likely the reason behind the fund’s significant growth in AUM, which almost quadrupled during the past three years, with significant net inflows in 2017, according to data from Morningstar. By comparison, the AUM of the MFS fund grew by around 46% during the same period and the fund saw net outflows in 2017.

Data: FE, returns in US dollars

“The Investec strategy has a strong record of delivering alpha through the cycle, particularly in rising market environments,” Hinton said.

The four factors around which it is built provide a certain level of diversification of performance drivers, as they tend to outperform in different market conditions. However, there are times when several factors underperform at the same time, which is what happened in 2008 when the strategy suffered.

Looking at the MFS fund, Hinton said the focus on stable, low-volatility companies “tends to offer more sustainable long-term returns across various market conditions”. It tends to outperform in falling markets, markets driven by long-term fundamentals and when quality stocks outperform. Momentum-driven markets and those that favour recovery stocks are not favourable to this strategy.

Data: FE, returns in US dollars, 1 March 2018, ratios are annualised

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