As well as all being smaller – and arguably more nimble – than some of the more well-known funds in their sectors, they have also demonstrated strong performance.
While all are pure equity portfolios, they are held in such high esteem by advisers that they appear in the AFI Aggressive, Balanced and even Cautious portfolios.
These are constructed using the recommendations of the 21 members – all experts in the financial adviser community.
Here we look more closely at the four funds that appear in all three indices.
PFS TwentyFour Monument Bond
The £160.7m PFS TwentyFour Monument Bond fund is managed by Ben Hayward, Rob Ford, Aza Teeuwen and Douglas Charleston.
The fund, which sits in the IMA Specialist sector, has consistently beaten its cash benchmark.
It has made returns of 24.22 per cent since its launch in August 2009, while the Libor GBP 3m index has gained just 3.55 per cent.
Performance of fund and index since April 2009
Source: FE Analytics
The five crown-rated fund is invested in residential mortgage backed securities [RMBS], primarily in the UK and Europe although it has some exposure to Australia.
Square Mile think it is ideal for investors who want a growing income in a rising interest rate environment.
“We believe this could be a very interesting proposition for investors who wish to access an income stream which should grow as interest rates rise, potentially offering investors some protection from the effects of inflation – although this is unlikely to be linear,” they said.
However, Square Mile added: “Although the teams' relatively cautious approach may help reduce downside risk in difficult periods, the relative illiquidity of RMBS as an asset class could lead to higher short-term capital volatility than their investment grade credit rating might imply,” Square Mile said.
PFS TwentyFour Monument Bond has an OCF of 1.38 per cent.
R&M UK Equity Income
FE Alpha Manager Daniel Hanbury has been running the £213m R&M UK Equity Income fund for just over a year, following a successful spell heading up some of R&M’s smaller mandates.
Rob Gleeson, head of FE Research says Hanbury’s style transfers well to this larger fund. He rates it highly, including it in the FE Select 100.
Since Hanbury took over management of the fund in July 2013 it has returned 15.24 per cent compared to a sector average of 14.58 per cent.
The FTSE All Share has gained 12.83 per cent over the same period.
Performance of fund, sector and index since July 2013
Source: FE Analytics
“Whilst income generation is clearly an important component of the strategy the manager also reviews a wide range of investment ideas from throughout the market cap spectrum,” Square Mile said.
“This pragmatism therefore allows the fund to perform well under different market conditions, though there will undoubtedly be upsets, which perhaps sets it apart from more rigidly managed income strategies.”
The fund’s OCF is 0.92 per cent.
Hermes Asia ex Japan
This $807m fund has been managed by Jonathan Pines since its launch in December 2012. It has been the best performing fund its sector over this period, beating rivals run by Aberdeen, First State and Baillie Gifford.
It has returned 44.22 per cent since its launch, more than three times the average return in the sector.
By comparison, the average return in the sector over this period has been 14.05 per cent and the MSCI Asia Pacific ex Japan index has risen 14.03 per cent.
Performance of fund, sector and index since Dec 2012
Source: FE Analytics
As well as outperforming, the fund has been less volatile and protected much better against the May and June sell-off of last year.
Hermes Asia ex Japan has maintained an almost constant sectoral split with its largest bet on consumer products, which makes up 30.76 per cent of the portfolio.
This overweight position plays into a major theme driving many emerging market countries, most notably China – the switch from an export-driven economy to a consumer-driven economy.
The fund’s OCF is 0.89 per cent.
Vanguard Emerging Markets Stock Index
With the likes of Aberdeen Emerging Markets Equity and First State Global Emerging Markets Leaders closing to new money, there is a lack of proven options in the IMA Global Emerging Markets sector.
Mike Deverell, investment manager at Equilibrium, thinks that a passive fund with a low tracking error may be the way to go, such is the lack of otpions.
“You would expect active funds to outperform passives in emerging markets because supposedly it is such an inefficient market,” he said.
“However, our research shows that does not appear to be the case. While the average active fund gives you similar returns to the index , it has been really hard to find any funds that consistently outperform and so that is why we have gone down the route of a low-cost alternative: a tracker.”
“It was not doing so well when markets were going down but as markets have been going up it has done well on a relative basis.”
The fund has returned 63.22 per cent since it launched in 2009, beating the average return in the IMA Global Emerging Markets sector.
Performance of fund, sector and index since July 2009
Source: FE Analytics
The fund has an ongoing charge [OCF] of 0.4 per cent.
