Magazine Issues » November 2007

UK managers confirm their superiority in the 2007 Alpha League Table

by Sabrina Macaire of EuroPerformance and Peter O’Kelly of the EDHEC Risk and Asset Management Research Centre

The latest instalment of the EuroPerformance/EDHEC Alpha League Table is devoted to the United Kingdom and reveals that, by the yardstick of alpha generated in equity funds, the results for UK asset management firms are far superior to those noted in our earlier analyses of French, Italian, Spanish, and Swiss firms. With a frequency of funds delivering alpha of over 45% and average alpha of 2.6%, UK asset managers provide unparalleled active asset management.

 Table 1: EuroPerformance/EDHEC Alpha League Table 2007

 COUNTRYAverage AlphaAlpha Frequency Final Score 
 UK 2.6% 45.9% 1.2%
 FRANCE 3.0% 29.8% 0.8%
 SWITZERLAND 2.4% 32.4% 0.8%
 SPAIN 2.2% 27.5% 0.7%
 ITALY 1.7% 15.8% 0.2%
 EUROPE 2.5% 33.9% 0.9%

Source: Style Analytics - as of 30 June 2007 

This ranking of asset management firms in the United Kingdom confirms the leadership of the biggest names in the City of London. Aberdeen is at the top of our rankings; its excellent rankings last year are thus confirmed. It not only offers substantial average alpha, but is also capable of generating it from a significant portion of its actively managed funds. In second place is Jupiter Asset Management, a subsidiary of one of the largest German banks, Commerzbank AG. Third place belongs to M&G Securities, a subsidiary of Prudential, the leading British insurance company. The rankings are dominated by the firms that attract the largest asset inflows in their countries. So it is no surprise to see such firms as Schroders, Fidelity, Invesco, or M&G Securities among the top ten.

 Table 2: EuroPerformance/EDHEC Alpha League Table 2007 UK

 RANKING COMPANYAverage AlphaAlpha Frequency Final Score 
 1 ABERDEEN3.48%81.21%2.82%
 2 JUPITER3.42%78.53%2.68%
 3 M&G SECURITIES4.38%57.99%2.51%
 4 OLD MUTUAL3.24%66.66% 2.17%
 5 SCHRODER UNIT TRUSTS LTD2.89%59.02% 1.71%
 6FIDELITY 2.36%68.13% 1.61%
 7 INVESCO UK LTD2.51%58.69%1.48%


Source: EuroPerformance/EDHEC Alpha League Table

The winner of the 2007 edition is an asset manager. Aberdeen takes the coveted top spot in the rankings with a score of 2.82%. Frequency of alpha is high, with 81.2% of selected funds generating significantly positive alpha. Average alpha is 3.48%. Aberdeen is a Scottish fund, and day-to-day management is divided between Aberdeen (headquarters) and Glasgow. The firm has expanded greatly since 2003 and in terms of assets under management it is now in the top quartile. Jupiter, with a score of 2.68%, takes second place. The average alpha of more than fifteen funds is 3.42% and the frequency of actively-managed funds generating alpha stands at 78.5%. M&G Securities Ltd takes third place with a score of 2.51%. This score is the result of average alpha of 4.38% and a frequency of alpha funds of 57.99%.

In fourth place is Old Mutual Asset Managers, a subsidiary of a leading financial services corporation from South Africa. Old Mutual has an overall score of 2.17%--average alpha is 3.24% and frequency of alpha funds is 66.7%. Schroders, with a score of 1.71%, is in fifth place. Average alpha is 2.89% and the frequency of outperforming funds is 59.02%. Fidelity, in sixth place, generates average alpha of 2.36% and has a frequency of alpha funds of 68.13%, for an overall score of 1.61%.

Investec Fund Managers Ltd shares seventh place with Invesco UK Ltd, both with scores of 1.48%. Investec had average alpha of 2.87% and a frequency of 51.73%. Invesco had slightly lower alpha of 2.51% but a slightly higher frequency of 58.69%. Ninth place is a tie between Blackrock Merrill Lynch and JP Morgan Fleming Asset Management, both with scores of 1.47%. For Blackrock Merrill Lynch average alpha comes to 2.24% and frequency to 65.76%. For JP Morgan, average alpha is 2.96% and frequency is 49.76%.

Analysing the results

The UK emerges as a favoured destination (31.9% of alpha funds) when alpha funds are broken down by investment zone. Funds investing internationally account for 20.5% of all four- and five-star rated funds. Funds investing in US securities (9.8%) are also a significant source of alpha. Asia (not counting Japan) is in fourth place at 5.8%, ahead of Europe funds at 4.3%. Asia (including Japan) and Japan alone are next, with 4.3% and 4.0%. Emerging markets (emerging Europe markets and emerging markets) account for 5.3%. All the major investment zones are represented: the USA, Asia, Japan, and Europe. By contrast, investment in countries in the Euro zone is not particularly high.

Source: EuroPerformance Style Analytics (

Average alpha is high in all investment zones. Asia and sector funds offer the greatest opportunities, with alpha levels of 5%. The large number of international funds, with average alpha of 3.0%, is characteristic of the quality of UK asset management. Europe, emerging markets, and Japan generate average alpha of between 2% and 3%. Funds invested in UK securities, however, have an average of less than 3%.


 Source: EuroPerformance Style Analytics (

On average, the alpha funds favour large caps, with small caps limited to 30% of the portfolio. This average is the result of markets strongly characterised by style. In emerging markets or in Asia (not including Japan), the notion of small caps is simply irrelevant, and style-based approaches take into account only the valuation of company stock (growth vs. value). In European markets, managers have greater knowledge of the economy and the share of small caps tends to be greater. This is the case for Europe portfolios, where the share of small and mid caps exceeds 50%. By contrast, for the most geographically diversified funds—international funds, for example— this share may fall below 20%.


Source: EuroPerformance Style Analytics (


About the EUROPERFORMANCE-EDHEC Alpha League Table

The Alpha League Table compares asset management firms’ ability to deliver positive alphas. The highest-ranked firms in the Alpha League Table are the best providers of alpha, i.e. the asset management firms that provide a good compromise between the value of the alphas produced and their frequency. This evaluation allows institutional investors to be sure that the company offering them a dedicated fund or an active management mandate has the ability to deliver added value in comparison with an investment in passive supports.

The Alpha League Table is a ranking constructed upon a measure of the intensity of alpha (the performance adjusted for the risks that were actually taken) for all of the asset management firm’s active “equity” management. The asset management firm must be registered with the regulatory authorities and must have at least four equity funds analysed, marketed and managed in the country studied. We identify the funds that produce alpha from the EuroPerformance-EDHEC Style Ratings.

The alpha intensity is calculated every month using two indicators:

  • The average alpha, which corresponds to the average of the positive alphas for the 4, 5 or 5 star ‘h’ funds in the Style Ratings.
  • The frequency of alpha, which is expressed by the number of funds with a strictly positive alpha (4, 5 and 5 star ‘h’ in the Style Rating) out of all the funds rated.

The final score, or alpha intensity, is the average of the 12 monthly scores. Only companies that have participated in the 12 monthly rankings are retained for the final rankings.




The EUROPERFORMANCE-EDHEC Style Ratings are put together from three criteria:

  • Risk-adjusted performance (or alpha): traditional risk-adjusted measures often refer to the average performance of a category or to an index, without any certainty that the category or the index truly represents the strategic allocation and, by extension, the risks to which the fund was exposed. To respond to this difficulty, the EuroPerformance-EDHEC style ratings implement a solution based on a multifactor index approach which allows the true alpha of the fund to be calculated. The risk-adjusted performance is measured first by selecting the style indices that represent the strategic allocation and therefore the risks taken over the rating period and then by calculating the fund’s excess performance while taking the risks to which it was really exposed into account.
  • Potential extreme loss: most rating methods do not explicitly integrate or do not attempt to measure the funds’ potential for extreme loss. The concept of Value-at-Risk (VaR) implemented in the EuroPerformance-EDHEC Style Ratings allows all the portfolio risks, which are spread between several asset classes, to be summed up in a single value. While a measure such as the variance characterises the average risk of the portfolio (mean dispersion in the return distribution), the Value-at-Risk refers to a value for the possible loss; in this sense, it is a measure of extreme risk.
  • Performance persistence: ratings are used by investors not only to reward past performance, but also to make investment decisions. From this point of view, a fund’s capacity to reproduce its performance is a key question for the users of ratings. The performance persistence measure implemented by the EuroPerformance-EDHEC Style Ratings relies on two indicators: the calculation of the gain frequency, which measures the frequency of positive alpha over the whole period on a weekly basis, and which aims to identify the managers who “repeat” their performance; and the Hurst exponent, which is a measure of the regularity of the outperformance, and which aims to evaluate the probability that, at the subscription stage, the outperformance will not be too different from that observed at the decision-making stage

The 5 star funds are those that outperform over the analysis period and provide a significant gain frequency that characterises persistence of outperformance. This excess performance is the fruit of the manager’s decisions: active stock picking and/or market or style timing. The 5 star H (Hurst exponent) category distinguishes funds that regularly outperform their benchmark. The ‘H’ is a decision support tool because it indicates that the investor has a better than average chance, at the subscription stage, of benefiting from good performance with the chosen fund.


by Sabrina Macaire of EuroPerformance and Peter O’Kelly of the EDHEC Risk and Asset Management Research Centre