The UK all companies and equity income sectors dominate Isa sales but rarely provide the best-performing funds in any given year.
The 10 top-performing funds over the past five years have been dominated by niche vehicles, including Russia, China, Japanese smaller companies and resources funds, according to Standard & Poor’s.
A scan of the performance tables on this page also shows how hard it is to pick next year’s winner. Japan funds topped the tables in 2003 and 2005 but these and Japanese smaller companies were the worst-performing sectors last year.
Legg Mason Japan equity, the fifth-best performer in 2005, with 69.91 per cent, ended up the worst performer last year, down by 50 per cent.
Mainstream UK equity funds have struggled to break into the top 10, although a number of smaller companies funds, such as Old Mutual UK select smaller companies and Standard Life UK smaller companies last year, have periodically made the performance hit parade.
Chelsea Financial Services managing director Darius McDermott says large caps have lagged small and mid-cap funds over the past five years and mainstream UK equity funds seldom beat more specialist funds in the short term.
He says: “Specialist funds, such as Japanese smaller companies or Russia, will have periods of strong growth that standard UK equity funds will struggle to beat.”
The strength of emerging markets, such as Russia and China, has also been a key component in driving the performance of natural resources, which have delivered strong returns in the past five years.
McDermott comments: “It is hard to pick next years’ winner. The trick is to have a balanced portfolio and accept that some parts will perform better than others in any given year.”