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Which fund groups and sectors have the best managers?

05 February 2014

FE Trustnet provides an in-depth guide to the 2014 FE Alpha Manager list.

By Joshua Ausden,

Editor, FE Trustnet

Henderson has the highest number of FE Alpha Managers in light of the latest rebalancing, with 10 of its stable making it into the top 10 per cent of fund managers in the UK.

The list includes European maestros Richard Pease and John Bennett, and income specialist James Henderson, who runs the Henderson UK Equity Income & Growth fund.

Henderson just edges out Jupiter, which has nine FE Alpha Managers this year. The Jupiter Merlin trio of John Chatfeild-Roberts, Peter Lawery and Algy Smith-Maxwell are among those with the elite rating.

Challengers to Henderson and Jupiter include Fidelity, which has eight FE Alpha Managers, as well as Cazenove, BNY Mellon, Schroders and Invesco Perpetual, which all have five apiece.

Cazenove funds are to be re-branded in late March following its acquisition by Schroders, which at that point will claim 10 FE Alpha Managers itself.

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Source: FE Analytics

“This is very pleasing to see,” said Simon Hillenbrand, UK sales director at Henderson. “We have focused on streamlining our offering, giving our fund managers the support they need and thus laying the foundations for the future growth of our business.”

“Our five pillars include global and European equities, multi-asset and global fixed income, as well as absolute return – all of which are represented in the FE Alpha Managers list. We continue to deliver strong investment returns but client service also remains core to what we do at Henderson.”

Pease is arguably the standout manager for Henderson, having been the only one to retain his FE Alpha Manager status since the rating system was launched in 2009.

FE data shows that all three of his funds – Henderson European Growth, Henderson European Special Sits and Henderson Horizon European Growth – have beaten their sector and FTSE World Europe ex UK benchmark over all relevant cumulative periods.

All of the funds have also been consistently less volatile than their benchmark. The aggregate result of this outperformance has seen Pease return 187.51 per cent over the last decade, compared with 119.71 per cent from his peer group composite.


Performance of manager and peers over 10yrs

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Source: FE Analytics

The FE Alpha Manager rating is entirely quantitative and totally independent, measuring not only relative returns but consistency, alpha generation, volatility and downside protection over a manager’s entire career.

The performance of UK-domiciled and FCA offshore-recognised funds is considered when rating managers, as are investment trusts. However, to qualify for inclusion, managers must run at least one fund in the IMA unit trust and OEIC universe.

Although Henderson has cut the number of funds it offers to UK investors in recent years, it is still one of the largest fund groups in this respect. Although Henderson comes out on top in absolute terms, Jupiter actually has a higher proportion of FE Alpha Managers.

Our research shows that nine of Jupiter’s 31 managers – or 29 per cent – are FE Alpha Managers, compared with 10 out of 52 for Henderson, or 19 per cent.

Jupiter also has the greatest number of funds run by at least one FE Alpha Manager at 18, just beating Henderson, which has 16.

ALT_TAG The Merlin trio, led by Chatfeild-Roberts (pictured), are the only Jupiter managers that have been FE Alpha Managers for six consecutive years. The Merlin portfolios have recently suffered underperformance versus their relevant sectors, particularly the Worldwide Portfolio which is now a bottom-quartile performer in the IMA Global sector over a five-year period.

However, FE Alpha Manager looks at an individual’s entire career rather than the short- or even the medium-term. Chatfeild-Roberts, who has run the range since 2001, still looks very good on an absolute and relative basis over the long-term.

Performance of manager vs peers since 2001

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Source: FE Analytics


Commenting on the successful rebalancing, Chatfeild-Roberts, who is also chief investment officer at Jupiter, said: “Part of our success lies in our ability to find and retain good people – we don’t manage money by committee.”

“We prefer to let our managers invest in the way they see fit while strongly encouraging them to interact with each other so they can benefit from each other’s expertise. This approach not only creates an esprit de corps, but provides a nurturing atmosphere conducive to strong performance.”

“It also means Jupiter has a deep pool of talent on which it can draw, with several of our managers having risen through the ranks to occupy the place they now hold. The team stays fresh and our investors benefit.”

It was a positive year for GAM, which now has four FE Alpha Managers, including industry stalwart Gordon Grender. Mark Costar and Robrecht Wouters’ upgrade also sees JOHCM take its number of FE Alpha Managers to four, alongside Franklin Templeton, Liontrust and MFS.

It was a less positive rebalancing for M&G, which saw its number of FE Alpha Managers drop from seven to three, including the demotion of M&G Recovery’s Tom Dobell.

While by no means boasting the greatest number of top-rated managers or highest number of funds run by top-rated managers, Ruffer can be very pleased with its FE Alpha Manager record.

Exactly half of the boutique firm’s stable of eight managers are FE Alpha Manager-rated, with four of their seven funds run by at least one FE Alpha Manager.

The likes of Steve Russell and Alex Grispos have a consistent record of protecting better against the downside than their peers, which has seen them excel in recent years.

Performance of managers and peers since Mar 2007

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Source: FE Analytics

Looking at sectors, IMA UK All Companies boasts the greatest number of funds run by top-rated managers in the UK [52] – perhaps hardly surprising given that it is the largest sector, with almost 300 constituents.

That said, it is noticeable that sectors closer to home have a higher proportion of FE Alpha Managers than those with a more global focus.

FE Trustnet research shows that UK and European sectors have the highest proportion of funds run by star managers.

In the IMA UK All Companies and IMA UK Equity Income sectors, 19 per cent of funds are run by FE Alpha Managers, while the figure jumps to 28 per cent in IMA UK Smaller Companies and 21 per cent in IMA Europe ex UK.

By contrast, the proportion of funds in emerging markets and global sectors tends to be lower. IMA Global Equity Income has become increasingly popular in recent years, yet only two of the 33 funds in the sector are run by FE Alpha Managers.

IMA Global also scored poorly, with just over 10 per cent of its 255 constituents run by the top 10 per cent of managers, and there was a similar figure for IMA Global Emerging Markets and IMA Asia Pacific ex Japan.


IMA Japan and IMA China/Greater China scored even worse, with just four FE Alpha Manager-led funds between them.

The difficulty of adding value in the US is also borne out by the data, with only seven of the sector’s 107 funds being run by star managers.

Multi-asset also fails to live up to UK equity. Of the 552 funds across the three Mixed Investment sectors and IMA Flexible Investment and IMA Targeted Absolute Return, only 47 – or 9 per cent – are run by FE Alpha Managers.

FE Trustnet will be conducting a study looking at the poor relative performance of ex-UK and European funds in an upcoming article.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.