Are portfolio managers susceptible to groupthink?
We thought it would be interesting to see whether DFMs are going off the beaten track or whether their fund picks resemble those of their peers.
Across regions and countries, we sought to find out just how widely held are the 10 most popular funds in a given sector as a proportion of DFMs’ overall holdings.
Our database yielded some interesting results, which we have summarised in the chart below.
European equities lead the pack as the most concentrated region among our allocators, with the 10 most popular products comprising exactly 50 per cent of DFMs’ total holdings.
Specifically, the sphere is dominated by three funds in particular: BlackRock European Dynamic, with 11 owners; HSBC European Index, with eight; and BlackRock Continental European Income, with seven.
The second most concentrated region is the UK (when discussing growth portfolios only), with 45 per cent weighting allocated among the 10 favourites.
We covered recently the ways in which DFMs’ UK equity picks comfortably outperformed the FTSE All-Share index across 2023.
Among these outperformers were several popular funds: Artemis UK Select, owned by five houses; JOHCM UK Dynamic, owned by six; Schroder Recovery, owned by four; and Man GLG Undervalued Assets, owned by three.
And then of course we have Liontrust Special Situations and Lindsell Train UK Equity, which are owned by six and seven allocators respectively.
In the US, DFM concentration of 43 per cent among popular US equity funds can at least in part be explained by the notorious difficulty of stockpicking in this market: five of the most popular 10 names are passive trackers.
It is worth noting that to ensure appropriate rigour, we have only selected regions or countries in which there are more than 100 equity funds on offer.
Japan is fairly concentrated, for instance, but has considerably fewer offerings from which to choose.
While on the subject of concentration, you may find it worthwhile to read up on our analysis of dividend homogeneity that we conducted last year, to see just how focused the UK dividend market has become.
