Head of research Rob Gleeson (pictured) also changed seven funds from “buy” to “hold” and six funds were given a sell rating.FE Alpha Manager Nick Train’s £1bn CF Lindsell Train UK Equity fund was one of four new entrants from the UK equity sectors as Gleeson and his team are fans of the manager’s unconstrained approach.
“This fund is run by the highly experienced FE Alpha Manager Nick Train. It has an excellent track record of producing market-leading returns while taking on less risk than its peers,” Gleeson said.
Since the five crown-rated fund was launched in July 2006 it has returned 148.33 per cent, beating the IMA UK All Companies sector by close to 90 percentage points.
The FTSE All Share, its benchmark, has returned 61.47 per cent over the same period.
Performance of fund, sector and index since July 2006
Source: FE Analytics
The fund has also outperformed the index in each of the last six calendar years.
Train takes a very-long term time horizon on the companies he holds and will take punchy stock bets within the portfolio, with his top 10 holdings accounting for 70 per cent of his total assets.
Because of that, the team at Square Mile research say it is only suitable for long-term investors.
“These low levels of portfolio turnover may appear indolent but these levels of inactivity are an inherent feature of the strategy,” Square Mile said.
“Returns generated tend to be 'lumpy' and do not always correlate closely with returns from the index.”
The other UK equity funds added to the list are, R&M UK Equity Income, Liontrust Macro Equity Income and Schroder Income Maximiser.
FE Alpha Manager Daniel Hanbury has been running the £213m R&M UK Equity Income fund for just over a year now following a successful spell heading up some of R&M’s smaller companies mandates.
Gleeson says his style will transfer well to this larger fund and have decided now is the time to add it to the FE Select 100.
The five crown-rated BlackRock Continental European Income fund is the only Europe ex UK fund to be added to list.
Launched in 2011, a torrid year for European equities, the fund has proven to be one of the up-and-coming funds in the sector, Gleeson says.
“The fund’s focus on income helps to differentiate it from its peers, but this has not affected total returns as it has consistently produced first or second-quartile performance over multiple time periods.”
The £445m fund, co-managed by Alice Gaskell and Andreas Zoellinger, has been the IMA Europe ex UK sector’s second best performer since its launch.
It has returned 37.9 per cent over that time, compared to the sector’s returns of 18.3 per cent.
Performance of fund, sector and index since May 2011
Source: FE Analytics
It currently yields 3.75 per cent and its top holdings include Atlanta, Energias Portugal and Imperial Tobacco.
Two global equity funds have been added to list; Invesco Perpetual Global Opportunities and Schroder MM International.
Invesco Perpetual Global Opportunities has only been headed up by FE Alpha Manager Stephen Anness and his co-manager Andrew Hall since May of this year but Gleeson says the managers previous experience vouches for its inclusion in the list.
“We rate Anness highly following his previous experience running the Pan European Equity Income and UK Aggressive funds at Invesco, both of which outperformed the market during his tenure in charge,” Gleeson said.
“We believe his high-conviction unconstrained approach will transfer well to this fund, which has more of a global mandate.”
A notable entrant to list is the £505m PFS TwentyFour Dynamic Bond fund managed by Eoin Walsh, Peter Kirk, Felipe Villarroel and Pierre Beniguel, which sits in the IMA Sterling Strategic Bond sector.
Since its launch in April 2010 it has returned 43.25 per cent compared to a sector average of 28.49 per cent.
Performance of fund, sector and index since Apr 2010
Source: FE Analytics
“Although unknown to many investors, this fund has proved to be an excellent buy for anyone looking for a high and stable income,” Gleeson said.
The fund invests mainly in Europe and the UK, with some US exposure.
Gleeson added: “It uses derivatives for the purposes of hedging and to control sensitivity to interest rates. The fund has a high-conviction approach, which makes it one of the more volatile in its sector and can count against it in down markets, as witnessed in 2011.”
“However, since then it has been a top-quartile performer in every year and currently holds the maximum five crown-rating.”
Chris Metcalfe, investment director at IBOSS, recently told FE Trustnet that he had bought the £460m fund to replace his holding in FE Alpha Manager Ariel Bezalel’s Jupiter Strategic Bond fund; which he feels is now too big.
Metcalfe says it is a fund that will be able to outperform in what is expected to be a difficult few years for fixed income.
“They are high conviction and aren’t benchmark constrained. Not being benchmark constrained is vital because if you are going to be in fixed income you have to go with managers who will move the portfolio as they like.”
He added: “Otherwise, I don’t think there is any point using bond funds at all. For managers to go where they want, they need the flexibility.”
