Our analysis of the IMA UK All Companies sector shows just six funds out of 273 have achieved top decile returns since 1 January 2014 while being among the lowest 10 per cent for volatility. Five of the six are also among the best of the sector for maximum drawdown, which shows how much an investor would have lost if they bought and sold at the worst possible times.
UK equities have endured a tough 2014, with the FTSE All Share up just 0.26 per cent year to date after investor sentiment suffered because of concerns over high valuations, numerous geo-political risks, a strong sterling and renewed weakness in the eurozone, the UK’s largest trading partner.
The average fund in the IMA UK All Companies has fared little better, as FE Analytics shows the peer group has gained just 0.51 per cent since the start of the year.
This ranks it 30 out of 34 IMA sectors, with only the Money Market, Short Term Money Market, European Smaller Companies and UK Smaller Companies peer groups making less money over 2014.
Performance of sector and index over year to date
Source: FE Analytics
The FTSE All Share’s annualised volatility has been 10.58 per cent in 2014 while it’s 11.47 per cent for the average fund in the sector. Looking at maximum drawdown, the All Share’s stands at 7.73 per cent and the sector average is 9.38 per cent.
Our study shows FE Alpha Manager Mark Barnett dominates the list of first decile returns and volatility with three of his funds appearing.
His £12.3bn Invesco Perpetual High Income fund, which Barnett took over from the departing Neil Woodford in March, is the leader after gaining 10.74 per cent since the start of 2014 with annualised volatility of just 9.97 per cent. Its maximum drawdown was only 6.46 per cent.
Invesco Perpetual High Income is third best in its sector this year for returns and maximum drawdown, while it’s in ninth place for volatility.
Barnett’s Invesco Perpetual UK Strategic Income, which he has headed since 2006, is first decile for returns, volatility and maximum drawdown. It’s up 10.64 per cent so far, making it the peer group’s fourth highest returning fund.
His £6.5bn Invesco Perpetual Income fund, which he also inherited from Woodford earlier this year, made the fifth best return of the sector with a 6.53 per cent gain, while its volatility is 10.31 per cent.
Performance of funds vs sector and index over year to date
Source: FE Analytics
Invesco Perpetual High Income has a clean ongoing charges figure (OCF) of 0.92 per cent and yields 3.05 per cent while Income has a 0.91 per cent OCF and yields 3.07 per cent. UK Strategic Income has a 0.92 per cent OCF with a 3.24 per cent yield. All three hold five FE Crowns.
George Godber and Georgina Hamilton’s £129.1m CF Miton UK Value Opportunities fund is ranked seventh in the sector with year-to-date returns of 8.89 per cent. Its annualised volatility over the period is 10.09 per cent while maximum drawdown is the second lowest at 6.08 per cent.
The fund, which targets firms that undervalued by the market, only launched in March 2013 but is the third best performing fund in its sector with a 30.63 per cent gain. This is more than double the 13.95 per cent made by the average fund in the peer group.
Its relatively low volatility compared to its peers is especially notable as the fund has just 8.7 per cent in the FTSE 100 but 32.6 per cent in the FTSE 250, 26.6 per cent in the FTSE AIM and 22.2 per cent in the FTSE Small Cap. Flybe Group is its largest holding, followed by Vertu Motors and Lookers.
Performance of fund vs sector and index over year to date
Source: FE Analytics
CF Miton UK Value Opportunities has a clean OCF of 0.94 per cent.
The other two funds highlighted by our research are likely to be off the radars of most investors - the £9.3m MFM Bowland fund, managed by Hargreave Hale's Leon Shuall, and Aruna Karunathilake's £116m Fidelity FAST UK fund.
MFM Bowland is up 8.10 per cent over 2014 so far with 9.99 per cent annualised volatility. While both these are first decile, the fund’s maximum drawdown is in the fourth decile at 9.51 per cent.
Shuall was appointed to portfolio at the start of the year and has been restructuring the portfolio to reflect his investment views.
Fidelity FAST UK is the twentieth best performer in the sector with a year-to-date return of 6.62 per cent. Its volatility is 10.32 per cent while its maximum drawdown is the sector’s lowest at just 5.50 per cent.
The Luxembourg-domiciled fund has more than 70 per cent of its portfolio in large and mega-caps, which outperformed during most of the second half of the year. Unilever is its biggest holding, followed by Sanofi, National Grid, SABMiller and Wolseley.
MFM Bowland’s OCF is 0.98 per cent while Fidelity FAST UK has a 1.28 per cent OCF.
Of course, the year to date is a very short time frame on which to judge funds so with this in mind a future series from FE Trustnet will look at the few funds that have achieved similarly strong return and volatility profiles over the longer term.
