Premier League of Funds delivers super returns

If you wanted to take advantage of bullish signs in the markets and buy, for example, a smaller companies fund, where would you turn to find one that might serve you well? For most private investors, past performance is the first place to start. And most will turn to longer-term periods such as three, five or seven years, to find out which funds have proven staying power.

But there is an element of luck to this selection process. Even a strong long-term record can mask shorter-term problems - or simply reflect past glories.

It is also true that even funds run by "star" managers with great long-term performance records suffer periodic blips in shorter term performance. When this happens, investors need to keep an eye on short-term returns for signs that poor performance is becoming entrenched.

Some high-performance funds can also be more volatile in relation to their peers so here you must have faith in the fund manager's strategy. It may, for example, be a strategy that is quite different to that adopted by most other funds in the sector which may lead to prolonged periods of underperformance in the peer group.

Investors who prefer less volatility want reassurance that a fund not only has a decent performance record, but one that is reasonably consistent.

That is what Money Observer's Premier League aims to help you identify. Every year we run the rule over 11 popular fund sectors from which we pick our Premier League team. Then every three months we check whether team members are fit enough to retain their place. 

Nine funds from last year's team continue to deliver superior 12-month performance - a strong indication that our selection system is one that by and large delivers excellent results.

For the methodology behind our selections, read: How we pick the Premier League funds.