Only seven funds in the entire unit trust and OEIC universe have five crowns, are included in all three AFI portfolios, have an FE Risk Score of less than 100, and have at least one FE Alpha Manager at the helm, according to our latest study.

The list includes industry favourites including Neil Woodford’s £8bn Invesco Perpetual Income fund and Richard Woolnough’s £4.9bn M&G Strategic Corporate Bond portfolio, which are among the largest in the industry. 

The least established of the seven is arguably Reza Vishkai’s £352m Insight Absolute Insight fund – an Absolute Return portfolio that was only launched in February 2007. It is a fettered fund of funds, investing exclusively in other portfolios run by Insight. 

Although Absolute Return funds have come under fire from a number of industry figures for taking on too much risk, Insight Absolute Insight is one of the few to have delivered positive returns in every calendar year since inception. 

Top-rated funds

Name	Sector
Insight Absolute Insight	IMA Absolute Return
Trojan	IMA Flexible Investment
M&G Strategic Corporate Bond	IMA Sterling Corporate Bond
JOHCM UK Opportunities	IMA UK All Companies
AXA Framlington UK Select Opps	IMA UK All Companies
Invesco Perpetual Income	IMA UK Equity Income
Marlborough Special Situations	IMA UK Smaller Companies

Source: FE Analytics

The one factor that all the funds have in common is their attitude to risk.

FE Fund Crown and Alpha Manager ratings are quant-based systems, designed to highlight funds/managers that have produced superior performance and consistency on a risk-adjusted basis.

The Adviser Fund Index (AFI) portfolios are based on selections made by a panel of leading financial advisers. The three are designed to fit the needs of cautious, balanced and aggressive investors.

Invesco Perpetual Income, Trojan, JOHCM UK Opportunities, M&G Strategic Corporate Bond and Insight Absolute Insight are all consistently among the least volatile in their respective sectors, have an FE risk score of 85 or less, and tend to outperform during falling markets.

However, despite short-term periods of underperformance, they have also delivered competitive returns during rising markets. 

JOHCM UK Opportunities, for example, is the second-least volatile fund in its sector over three- and five-year periods, and was a top-decile performer in the down markets of both 2008 and 2011.

Although at first glance the fund’s record during the 2009 and 2010 QE-fuelled bull run looks disappointing, it has returned enough to secure top-quartile performance over five years, and since its launch in November 2005. 

Performance of fund vs sector and benchmark since launch



Source: FE Analytics

With an FE Risk Score of just 71, John Wood’s £900m portfolio is deemed the least risky in the entire UK All Companies sector.

Nigel Thomas’ AXA Framlington UK Select Opps fund isn't far behind: it has a volatility similar to its FTSE All Share benchmark, and has an FE Risk Score of 98. 

It has outperformed this index in every calendar year between 2007 and 2011.   

Performance of leading funds vs index



Source: FE Analytics

Over one, three and five years, these seven funds have, unsurprisingly, outperformed the FTSE All Share, with significantly less volatility. Apart from Sebastian Lyon’s Trojan fund, all on the list above are still open to new money, with a minimum investment of £500, £1,000 or £5,000.