UK active fund managers bounce back in historic year for the stock market

In the battle of the manager versus the machine, humans have been punching above their weight with UK funds so far this year. In both the UK All Companies and UK Equity Income categories, the top 10 performers were dominated by actively managed funds.

Fund managers will be jumping for joy given the active fund industry has faced growing criticism over widespread sub-par performance.

Investors are increasingly turning to passive investments such as tracker funds and ETFs, finding them cheaper and more convenient. It’s incredibly hard for fund managers to beat their benchmark year in, year out and many people are happy to simply track the market. The challenge now for active funds is to sustain this year’s outperformance. That’s easier said than done.

Top 10 best performing UK All Companies funds year-to-date

Source: AJ Bell, FE Fund Analytics. Total return data 1 Jan to 30 Sep 2025

Great year for UK stocks

Fund managers have enjoyed a favourable environment in 2025, with a decent showing across UK stocks in general. The FTSE All-Share is widely used as a benchmark for the UK stock market and it has returned 16.6% so far this year, including dividends.

The other key benchmark for UK stocks is the FTSE 100 which hit another new record high at the end of September.

Some of the biggest stocks in the FTSE 100 have delivered supersized rewards for investors this year. For example, 10 stocks in the index have generated total returns above 50% year-to-date, half of which have more than doubled investors’ money since 1 January including miner Fresnillo and defence group Babcock.

You could argue that most people investing in UK equity funds, either passive or active, should be happy with performance over the past nine months whether their choices have beaten the market or not. Very few funds in the UK All Companies and UK Equity Income sectors have lost money for investors, and more than 100 have delivered double-digit returns including dividends. It’s been a great year, but investors shouldn’t expect it to always be this way.

Scooping up dividends

The scale of outperformance from certain UK funds in 2025 is impressive. Investors who opt for active management typically pay higher fees than passive funds and they expected to be rewarded appropriately. Traditionally, they might deem a few extra percentage points as acceptable. This year, the best-performing UK funds have been pouring the equivalent of liquid gold.

SVS Zeus Dynamic Opportunities has shown what’s possible with successful stock picking, delivering more than 11 percentage points of outperformance so far in 2025 compared to the FTSE All-Share. It has generated a 28.4% total return in just nine months – approximately three times as much as you might expect from UK investments in a whole year.

Managed by Caspar Trenchard, the Zeus fund has just over one quarter of its assets in FTSE 100 stocks, 38% in FTSE 250 names, 30% in small caps and the rest in cash. It’s a real stock picker’s portfolio rather than an index hugger.

Artemis SmartGARP UK Equity is another standout name and blends a mixture of managers and machines. An in-house computer system looks for stocks with certain characteristics, and the managers then sift through the menu of potential ideas for the cream of the crop. A 27.7% total return year-to-date would suggest it has hit upon a winning formula.

Star performers

Top 10 best performing UK Equity Income funds year-to-date

Source: AJ Bell, FE Fund Analytics. Total return data 1 Jan to 30 Sep 2025

On the UK Equity Income side, seven out of the top 10 best performers year-to-date are active funds. At the top is Barclays UK Equity Income, a multi-manager fund where Jupiter and Aberdeen each run parts of the portfolio.

The Barclays fund has returned 20.6%, a whisker above the top performing passive fund. iShares UK Dividend ETF has returned 20.4% from tracking an index made up of high-yielding stocks from the FTSE 350 index.

Which funds have done poorly?

In the doghouse is fund manager Nick Train whose Lindsell Train UK Equity fund has lost 2.7% year-to-date.

Already under fire for successive years of underperformance with his Finsbury Growth & Income Trust, Train’s status as one of the last remaining ‘star managers’ is now open to question. He’s blamed poor performance on having large exposure to consumer brand owners that, in his words, have been ‘less reliable’ than expected, most notably Diageo.

There has been a shift in the Lindsell Train UK Equity portfolio towards names with a digital focus but, so far, it’s not been enough to put the fund back on top.

Past performance is not a guide to future performance and some investments need to be held for the long term.