While US equities and long-duration government bonds had a strong year, areas such as the UK and Europe found it harder to make progress. But even though concerns such as geo-political tension, the spread of Ebola and the end of QE in the US hung over markets, investors continued to allocate to funds.
FE Analytics shows that five funds took in more than £1bn in new money across the space of the year. Another 17 captured between £500m and £1bn in 2014.
Source: FE Analytics
In actuality, our data shows there were six funds that took in more than £1bn last year. However, the one which we’ve cut from the list – the Scottish Widows Gilt fund – saw its assets swell primarily on the back of the restructuring life and pension assets at Lloyds and Scottish Widows rather than investor inflows.
As the graph above shows, Richard Woolnough’s M&G Optimal Income leads the pack after receiving more than £4.3bn in net inflows. The fund has been a persistent high ranker when it comes into the annual inflow league.
However, with its assets under management (AUM) nearing the £24.5bn mark, some have questioned whether the fund is growing too large. The FE Alpha Manager said last year that the portfolio’s size means it is harder to add value on a stock-selection level but pointed out that its approach is based more around sectoral and macroeconomics calls.
In terms of performance, M&G Optimal Income was in the middle of the rankings last year with a total return of 4.75 per cent. This compares with a 6.09 per cent return from the IA Sterling Strategic Bond sector and places it in the peer group’s third quintile.
Performance of fund vs sector over 2014
Source: FE Analytics
However, the fund is highly regarded by analysts, appearing on the FE Research team’s Select 100 list and holding an ‘AA’ rating from Square Mile.
The FE Research team says the fund continues to perform well despite its size, but added: “The pace of inflows seem steady but we fear the manager will not be able to react quickly if needed. This also has the potential to limit Woolnough’s ability to find investment opportunities of a suitable size.”
M&G Optimal Income has a clean ongoing charges figure (OCF) of 0.91 per cent and yields 2.87 per cent.
The CF Woodford Equity Income fund, headed by FE Alpha Manager Neil Woodford, set records for inflows when it launched in June after taking £1.6bn during its offer period. Since then, it has grown to around the £4.3bn mark.
Given the impressive track record built up by Woodford over his time at Invesco Perpetual, it always seemed clear that the fund would do well in attracting assets at launch – the only question was how much would it raise.
The offering was also well received by the fund analyst community. Square Mile gave it an ‘AAA’ rating at launch, citing Woodford’s past record, transparent approach and well established process.
“We conclude that this is a compelling investment proposition and one most worthy of consideration by long-term investors,” the consultancy said.
“There is a clear and understandable investment process in place, which has been used by Mr Woodford for many years, and furthermore he is backed by an experienced and likeminded team as well as a committed parent firm.”
As the below graph shows, the new fund has performed well against its peer group and the FTSE All Share, with a 10.96 per cent return since it launched.
Performance of fund vs sector since launch
Source: FE Analytics
CF Woodford Equity Income has a clean OCF of 0.75 per cent.
Next on the list is another constantly popular fund – Standard Life Investments Global Absolute Return Strategies (GARS), where assets have reached almost £23.2bn after inflows of close to £2bn in 2014.
The three FE Crown-rated fund is well regarded by investors and advisers, thanks to its history of outperformance and low correlation to asset classes such as equities and bonds. It has a place on the FE Select 100 and has an ‘A’ rating from Square Mile.
GARS made second quartile returns of 4.84 per cent last year. While it was more volatile than its average peer with a score of 4.50 per cent, this is still around one-third the volatility of the FTSE All Share.
Last year was undoubtedly strong for the fund in terms of inflows but it does have competitors launched by former members of its investment team, snapping at its heels. David Millar, Dave Jubb and Richard Batty’s Invesco Perpetual Global Targeted Returns took £272.21m in 2014.
Standard Life Investments Global Absolute Return has a 0.89 per cent clean OCF.
Property has been creeping more and more onto investors’ radars over recent years, with Marcus Langlands Pearse and Ainslie McLennan’s Henderson UK Property fund is a key beneficiary last year. Our data shows the fund took in £1.1bn during 2014 and returned 11.55 per cent to investors, against a sector average of 10.75 per cent.
The portfolio invests in bricks and mortar, not property shares, and is focused on prime locations in order to access good quality, well-managed properties, which means it has a high allocation to the south-east of England. Its largest tenant by income is Royal Bank of Scotland, followed by Sainsbury’s, B&Q and Travelodge Hotels.
Henderson UK Property has a 0.85 per cent clean OCF and yields 3.50 per cent.
The final portfolio to take in more than £1bn last year is the four FE Crown-rated Artemis Global Income fund, which has been managed by Jacob de Tusch-Lec since launch in September 2010 and has attracted attention thanks to its consistent outperformance.
Our data shows the fund is currently first quartile over cumulative one and three-year periods, as well as over three and six months. It also turned in top-quartile returns, and was the third best performer or better in its sector, in 2012, 2013, 2014 and over 2015 so far; although it was third quartile in the down year of 2011 with a 5.43 per cent loss.
Around one-third of de Tusch-Lec’s £1.6bn portfolio is in the US, with 20.8 per cent in the eurozone and 10.4 per cent in the UK. Its largest holdings are AbbVie, Apple, Man Group, Deutsche Annington Immobilien and Intel.
Performance of fund vs sector over 2014
Source: FE Analytics
Artemis Global Income has clean ongoing charges of 0.84 per cent and yields 3.30 per cent.
