First State Investments UK is the group with the highest average FE Crown rating in the Investment Association universe, according to the latest rebalancing, as out of its 18 funds the average rating is 3.89 crowns.
This morning FE released its new FE Crown ratings, which are quantitative ratings ranging from one to five designed to help investors identify funds that have displayed superior performance in terms of stock picking, consistency and risk control.
The scores are rebalanced half yearly using three-year total returns and are made up of three parts relative to a designated benchmark: the alpha, volatility and consistency tests.
As a result, FE Trustnet has a written a number of articles looking at the rebalancing from a fund specific perspective (‘The five funds winning a top FE Crown rating at the first attempt’ and ‘The funds making the biggest jump up the FE Crown ratings table’) but here we focus on the groups that have fared particularly well.
To whittle down the list, we only took into account groups in the Investment Association universe that have at least 10 funds eligible for the rating – therefore removing several top-rated boutiques such as CF Ruffer Investment Management, Majedie Asset Management and Unicorn Asset Management.
This left us with 60 groups and, as the table below shows, it was First State that came out on top.
Fund groups with the highest average FE Crown rating
Source: FE Analytics
It’s been an eventful 12 months or so for the group thanks to a spilt within the company and an extensive manager reshuffle. 
The Edinburgh office, which includes FE Alpha Managers Angus Tulloch (pictured), was renamed Stewart Investors while the Hong King team, which includes Martin Lau, is now called FFS Asia. Also, the likes of Tulloch and Jonathan Asante have taken a step back from day-to-day portfolio management at Stewart Investors.
Nevertheless, the two teams are still joined under the First State Investments UK umbrella and have the highest average FE Crown rating of 3.89 out of five.
Out of the 18 funds we measured, 10 have the highest possible five-crown rating. These include Stewart Investors Latin America, Stewart Investors Global Emerging Markets Leaders and First State Emerging Markets Bond.
Given the quality of the group’s Asian equity team, it will come as no surprise that the three Asia Pacific funds all carry the highest possible rating.
According to FE Analytics, the £326 Stewart Investors Asia Pacific Sustainability, £7.7bn Stewart Investors Asia Pacific Leaders and £670m Stewart Investors Asia Pacific funds all sit in the IA Asia Pacific ex Japan sector’s top decile over three years and have comfortably beaten their MSCI AC Asia Pacific ex Japan benchmark in the process.
Performance of funds versus sector and index over 3yrs
Source: FE Analytics
The funds are also top quartile over one, five and 10 years plus they are top decile for their maximum drawdown, annualised volatility and risk-adjusted returns (as measured by the Sharpe ratio) over the relevant three-year period, which has been a difficult period for the asset class.
This, again, further demonstrates First State’s dominance within the sector.
Of course, some investors were perturbed by the recent manager reshuffle within the Asian equity team. However, the likes of Premier’s Simon Evan-Cook told FE Trustnet that there is no need to worry.
“My initial thoughts are that investors should probably do nothing because I’ve been lucky enough to meet with Angus and his team quite a bit, and I would say that out of all the teams I’ve met in the industry, they have probably put the most thought into session planning and genuine building of a talented and diverse team,” Evan-Cook said.
“As a holder of that fund, I would be very comfortable that it’s going to be in good hands going forward.”
Evan-Cook will no doubt be happy to see that Premier Asset Management ranks second on the list, as out of its 23 funds, the average rating is 3.65.
All in all, 11 of those 23 funds have a five crown-rating including Premier Defensive Growth, Premier Monthly Income and the £61m Premier Multi-Asset Global Growth fund – which Evan-Cook holds his entire pension in.
FE data shows the portfolio’s 30.01 per cent gain over three years ranks it sixth in the 124-strong IA Flexible Investment sector over three years and, more importantly, means it has beaten the MSCI AC World index as well.
Source: FE Analytics
While it has had a slightly higher maximum drawdown and annualised volatility than its peer group average (which is understandable given it is almost entirely invested in equity funds), it has been top decile for its risk-adjusted returns over the past three years.
Invesco Perpetual Fund Managers, which ranks third on the list, deserves a special mention.
Though its average crown rating of 3.39 is lower than First State and Premier’s, the group has more than double the amount of funds with a long-enough track record than those two firms combined at 44 portfolios.
In fact, out of the top 10 groups in this study, only F&C (BMO Global Asset Management) – with an average crown-rating of 3.12 – and Fidelity International (FIL Invt Svcs UK Ltd) – with an average crown rating of 3.06 – have more funds with a long enough track record.
Eleven of Invesco Perpetual’s 44 funds have the highest five crown-rating. In fact, a recent FE Trustnet study found the Henley-based company was the second best performing fund group of the past 10 years with some 75 per cent of its portfolios outperforming their relevant benchmarks over that time.
Long-term backers of the group will be pleased to see that all three of FE Alpha Manager Mark Barnett’s UK equity income funds have the highest possible crown rating.
Barnett took over two of them (Invesco Perpetual High Income and Income) from star manager Neil Woodford following his departure from the group in March 2014 and the pressure was on to see whether he could maintain the portfolios’ stellar track records.
Despite significant redemptions (with most of the money following Barnett’s predecessor to CF Woodford Equity Income), the fact he took on three extra portfolios and the manager’s wish to rotate the funds to his liking, both have been top decile performers in the highly competitive IA UK All Companies sector with returns in excess of 9 per cent.
As a point of comparison, the FTSE All Share has lost 6.68 per cent over that time.
Performance of funds versus sector and index under Barnett
Source: FE Analytics
Both funds are underperforming CF Woodford Equity Income by a wide margin since its launch in June 2014, however.
The group’s other five crown-rated funds include Invesco Perpetual Emerging European, Invesco Perpetual Global Emerging Markets, Invesco Perpetual Monthly Income Plus and Invesco Perpetual High Yield.
The other firms to make up the list of the highest average crown rating are Royal London Unit Trust Managers (31 funds with an average rating of 3.3), Close Brothers AM (15 funds with an average rating of 3.2) and Marlborough Fund Managers (19 funds with an average rating of 3.11).
Turning the study on its head now and the group with the worst average rating is HBOS Investment Fund Managers at 1.46 out of its 13 funds.
Fund groups with the lowest average FE Crown rating
Source: FE Analytics
Out of those 13 funds, all but one (Halifax Fund of Investment Trusts) have a crown-rating of two or below.
The likes of UBS Asset Management Funds, Cavendish Asset Management, Legg Mason Funds ICVC and Barclays feature on the list of the worst average ratings with scores all below two FE Crowns.