While this can be a useful comparison, it can mean that funds in the more diverse groups – such as the IMA Specialist and IMA Unclassified sectors – are overlooked as a comparison with the fellow members tells the investor very little.
In the article below, we review the IMA Specialist sector for highly rated for performance and their management teams.
PFS TwentyFour Monument Bond
This £196.6m fund holds five FE Crowns and features on Square Mile’s Academy of Funds, where it holds a ‘AA’ rating.
It has been managed by Ben Hayward and Rob Ford since launch in August 2009. Aza Teeuwen and Douglas Charleston have joined them since.
PFS TwentyFour Monument Bond, which invests in residential mortgage backed securities, has returned 28.77 per cent since inception, against a 3.67 per cent gain in its three-month LIBOR benchmark.
Its three-year return is 24.49 per cent while it is ahead 5.36 per cent over the past 12 months.
Performance of fund vs index since launch
Source: FE Analytics
In keeping with its focus on capital preservation, the fund has a maximum drawdown – which indicates how much an investor would have lost if they bought at a fund’s peak and sold at the trough – of just 1.36 per cent over the past three years.
Its annualised volatility over this time is 1.81 per cent.
Square Mile said: “This is a unique fund, run by an experienced team of specialist investors, and offering investors access to an asset class which could otherwise be difficult to gain exposure to. Since launching the fund in August 2009, the team have proved themselves capable of managing this mandate through sometimes difficult markets, maintaining their focus on quality and their rigorous bottom-up analysis of each individual security.”
PFS TwentyFour Monument Bond has clean ongoing charges of 1.08 per cent and currently yields 1.92 per cent.
Aberdeen Latin American Equity
This £153.2m fund is tipped by Square Mile as a potential investment for those with longer time horizons, given its volatile nature.
The investment consultancy rates the fund an ‘A’, and it holds four FE Crowns.
Since launch in February 2011 the fund has actually lost money, down 15.24 per cent, while its MSCI Emerging Markets Latin America 10/40 benchmark is up 9.25 per cent.
The fund suffered significant falls in the year following March 2013 and, although performance has picked up more recently, it is yet to fully recover.
Performance of fund vs index since launch
Source: FE Analytics
The portfolio’s maximum drawdown and volatility over three years are much higher than the benchmark’s.
However, it has a high tracking error and an r-squared ratio of just 0.41, which shows the management team is willing to look beyond the index for opportunities.
Square Mile said: “The unconstrained mandate and the emphasis on quality does mean that the fund can deliver a highly variable performance relative to the index, although in general, it has tended to defend well in falling markets. The fund may not suit investors that seek benchmark-like returns but we think it holds appeal for investors with a long-term horizon.”
Aberdeen Latin American Equity has a clean OCF of 1.75 per cent.
Baring German Growth
Robert Smith’s £365.2m Baring German Growth fund holds four FE Crowns and has returned 133.30 per cent since the manager took over the portfolio in November 2008.
The DAX benchmark, meanwhile, has risen 95.17 per cent over this time.
Performance of fund vs index over manager tenure
Source: FE Analytics
The fund appears on the FE Select 100 list of recommended funds, with Rob Gleeson and his team highlighting the abilities of FE Alpha Manager Smith.
“Smith took responsibility for the fund in November 2008 after it had been suffering along with the rest of the market and immediately began to reduce its high concentration to a small number of large German companies,” the team said.
“He also gradually increased its exposure to small- and medium-sized businesses, as he believed they stood a better chance of adding value. This has paid off over the last three calendar years, as the fund has outperformed its benchmark.”
The fund counts names such as Bayer, Daimler Chrysler, Siemens, BASF and Allianz in its top 10 holdings.
It largest sector weighting is to industrials, at 23 per cent followed by consumer discretionary and materials.
Baring German Growth has clean ongoing charges of 0.82 per cent.
Invesco Perpetual Global Financial Capital
The fund, which only launched in January 2012, is regarded as a ‘positive prospect’ by Square Mile.
The fund’s youth means it has not yet been assigned an FE Crown rating. It was launched to capitalise on the raft of reforms that were pushed on the financial sector in the wake of the global financial crisis and invests across the capital structure.
It is managed by star bond duo Paul Causer and Paul Read, with Julien Eberhardt as deputy.
Since launch the fund is up 74.30 per cent. It has no set benchmark but as a point of comparison it has outperformed the FTSE World Financials index which has risen 67.69 per cent over the same time frame.
Performance of fund vs index since launch
Source: FE Analytics
Square Mile said: “The nature of the investments in the fund mean that there may be a substantial degree of capital volatility over the short to medium-term, with the fund likely to perform well in an environment of investor optimism, but to lag in times of weaker market performance. Over the longer-term we expect the fund to capitalise on the opportunities available, and performance of the fund since launch has been very strong.”
Invesco Perpetual Global Financial Capital has a clean OCF of 0.77 per cent.
Next week FE Trustnet will search through the IMA Unclassified sector looking for more hidden gems.
