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FE’s top-rated funds at the first time of asking

17 July 2014

FE has revealed which funds have received the coveted five crown-rating at their first attempt.

By Alex Paget,

Senior Reporter, FE Trustnet

Conbrio Sanford Deland UK Buffettology, BlackRock Continental European Income and Aberdeen Emerging Markets Bond are among the 10 IMA funds to have gained FE’s five-crown rating at the first time of asking during the most recent re-balancing.

FE uses its Crown Fund Ratings to rank portfolios according to their alpha generation, volatility and the consistency with which they have beaten their benchmarks over the three years to 30 June 2014.

The rankings are reviewed biannually and the top 10 per cent of funds are awarded five FE crowns, with the following 15 per cent receiving four FE crowns.

Funds can only achieve a crown rating if they have a three year track record; in the most recent rebalancing, nine funds have jumped to the highest possible rating at their first attempt.

One example is the £17.8m Conbrio Sanford Deland UK Buffettology fund, which is managed by Keith Ashworth-Lord.

The fund was launched in March 2011 and, according to FE Analytics, it has been a top decile performer in the highly competitive IMA UK All Companies sector over that time with returns of 57.43 per cent.

It has beaten its benchmark – the FTSE All Share – by 25.09 percentage points in the process.

Performance of fund vs sector and index since Mar 2011


Source: FE Analytics

While the fund did underperform in the remaining months of 2011, it delivered top quartile returns in 2012 and 2013.

Ashworth-Lord’s portfolio has been top decile in the sector for its alpha generation, relative to its benchmark, information ratio and Sharpe ratio since March 2011, and the fund also boasts the lowest annualised volatility of any find in the sector over that time.

As its name suggests, the fund attempts to mirror the investment principles of legendary US investor Warren Buffett.

Ashworth-Lord runs a concentrated portfolio of just 27 stocks and tries to keep portfolio turnover to a minimum.

A comprehensible business model, an enduring franchise with pricing power, strong cash flow and high returns on capital are all crucial when it comes to stock selection, the manager says.

The size of the fund means the manager has the flexibility to invest down the market cap spectrum.

Major holdings include Liontrust Asset Management, Dixons, Diageo, Domino’s Pizza and Dart Group.

The fund doesn’t yet have a clean share class, meaning charges are very high at 1.94 per cent.

This figure is excepted to come down, however. Barclays UK Alpha, AXA Framlington Monthly Income, Fidelity UK Smaller Companies, FF&P Core UK Equity and PFS Downing Active Management are among the other UK equity funds which have received the five-crown rating; though not at the first time of asking.

Another newcomers is Alice Gaskell and Andreas Zoellinger’s £410m BlackRock Continental European Income fund.

Last month, Chelsea’s Darius McDermott told FE Trustnet that it was his favourite fund to access the region’s dividend paying market.

The fund was launched in May 2011. Over that time, our data shows it has been the best performing IMA Europe ex UK fund with returns of 40.81 per cent, more than doubling the returns of its FTSE World Europe ex UK benchmark in the process.

Performance of fund vs sector and index since May 2011


Source: FE Analytics

Those returns have been consistent, with the BlackRock fund outperforming the sector and index in the falling market of 2011 and the rising markets of 2012 and 2013.

The fund also sits in the top quartile so far in 2014.

The fund has a keen emphasis on capital preservation, and is top quartile for downside risk, maximum drawdown, annualised volatility and Sharpe ration since launch.

BlackRock Continental European Income currently yields 3.68 per cent. Its clean share class has an OCF of 0.92 per cent.

A slowdown in China’s economic growth, currency weakness in large parts of the developing world and the tightening of US monetary policy has contributed to a very poor period for emerging market debt managers.

ALT_TAG However, the £70.4m Aberdeen Emerging Markets Bond fund has been something of an exception, protecting against the downside much more effectively than most during the slump, and generating a strong yield as well.

“Aberdeen Emerging Markets Bond can attribute its five FE crowns to a high alpha score and consistently strong performance; the fund was first quartile in 2012, 2013 and year to date,” Oliver Clarke-Williams (pictured) said.

According to FE Analytics, it is the second best performing portfolio in the IMA Global Emerging Markets Bond sector since its launch in March 2011, with returns of 23.48 per cent.

The only one that’s beaten it is Pimco GIS Emerging Markets Bond, which isn’t as widely available to UK investors.

Performance of fund vs sector since Mar 2011


Source: FE Analytics

As the graph above shows, while the Aberdeen fund did fall considerably during the “taper tantrum” in May/June last year, it has nearly recovered its losses; unlike the large majority of its competitors within the sector.

The fund currently yields 5.5 per cent.

Investors who bought £1,000 worth of units at launched would have since earned £169.51 in dividends, which is above average for the sector.

Aberdeen Emerging Markets Bond invests in both local sovereign debt and local corporate credit. Its OCF is 1.15 per cent.

The other funds to achieve the coveted five-crown rating at the first time of asking are L&G Global Environmental Enterprises, S&W Hercules Growth, Cazenove The Little Acorn and four Vanguard funds – LifeStrategy 40% Equity, LifeStrategy 40% Equity, UK Long Duration Gilt Index and UK Inflation Linked Gilt Index.

Two funds saw considerable improvement in terms of crown rating in the latest rebalancing.

Improved performance in PFS Downing Active Management – tipped by SG Wealth Management’s Neil Shillito in early 2013 – has seen crowns jump from two to five, while the previously one-crown rated Aberdeen Multi Manager Ethical Portfolio now has four crowns.

It was less positive news for Henderson Global Growth, JPM Japan and TM Managed however, who all saw their crowns fall from four to one.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.