In the runaway bull market, few could match the performance of the trackers. These are funds that invest in those companies that make up the chosen index.
Because trackers simply follow the stock market, the best known trackers, such as those from Virgin, Legal & General, Direct Line and Norwich Union, have slipped into the second quartile - meaning they are still performing above average but they are not in the top 25 per cent of funds. It is a worrying phenomenon that around half the sector's actively managed funds (which charge investors more because a management team selects shares) continue to perform worse than computer-run rivals.
One of the solid, actively managed performers, often recommended by financial advisers, is the pounds 500m Newton Income fund, which has a minimum investment of pounds 1,000 or pounds 50 a month. It is expensive - there is a 6 per cent initial charge, which is being discounted to 4 per cent for lump sums, and a 1.25 per cent annual charge.
Since its launch in 1985, the Newton Income Fund has grown by slightly more than double the notional return of the FT-SE All Share, the index that measures the share price performance of more than 800 of our largest companies. With dividends reinvested, it has averaged an annual return of 17.5 per cent a year.
"Our aim is rising income and capital appreciation from investing in UK equities," says Simon Wombell, Newton's marketing director.
"Our emphasis is on selecting quality companies such as Shell, BT and Glaxo with a little bit of the fund in smaller companies."
Most of the leading performers are heavily invested in the top 100 UK companies. This is because in turbulent markets, they want to be in liquid stocks, those that can be bought and sold easily. Unfortunately, many companies, not just smaller ones, are suffering from poor supply and demand for their shares. This is reflected in widening spreads for many shares between their buying and selling prices.
And what of the future? Surprisingly, the balanced funds are not too gloomy. They still insist that in the long term, equities will do well. Newton Income has just sold its gilts holdings, which made up some 7 per cent of the fund, to have money to put slowly into the market.
It will be interesting to see what happens if the stock market consolidates its bounce-back. Will tracker funds dominate or will more than a handful of active managers have learned how to outperform them?
The top performers
Top income and growth unit and investment trust funds
Over one year % growth
1 CF The Utilities Fund 26.18
2 Dunedin Income Growth (IT) 25.25
3 Newton Income 23.00
4 Five Arrows UK Major Cos (B) 22.65
5 Merchants (IT) 22.48
6 Five Arrows UK Major Cos (A) 21.52
7 Fleming Income & Capital Units (IT) 21.03
8 BWD Balanced Portfolio 17.68
9 Baillie Gifford British 350 17.65
10 Laurence Keen Income & Growth 17.51
Sector Average 10.08
FT-SE 100 15.22
Over three years
1.Govett Geared UK Index 84.47
2.CF The Utilities Fund 80.38
3.Laurence Keen Income &Growth 77.08
4.Fleming Select UK Income 75.98
5.Five Arrows UK Major Cos (B) 69.76
6.BWD Balanced Portfolio 69.24
7.Newton Income 68.27
8.Five Arrows UK Major Cos (A) 68.02
9.Barclays FT-SE 100 67.35
10.River & Mercantile Top 100 64.75
Sector Average: 50.31
FT-SE 100 71.49
Over five years
1.CF The Utilities Fund 127.05
2.BWD Balanced Portfolio 114.57
3.Fleming Select UK Income 109.79
4.Govett Geared UK Index 109.59
5.Barclays FT-SE 100 108.40
6.Aberdeen Prolific UK BlueChip 98.64
7.Newton Income 97.97
8.Perpetual Income 96.48
9.Laurence Keen Income &Growth 95.94
10.Royal&SunAlliance Growth & Income 91.58
Sector Average 72.31
FT-SE 100 107.8
Lump sum, pounds 100 invested. Bid to bid. All figures to 2.11.98.
Source: S&P Micropal