Ten funds, including portfolios from Invesco Perpetual, Schroders and Artemis, have just been awarded the top score of five FE Crowns in their first rating by FE’s analysts.
The FE Crown Fund Ratings system is a quantitative measure that aims to identify funds that have displayed superior performance in terms of stockpicking, consistency of outperformance against a credible benchmark and achievement of results at a relatively low risk over recent time frames.
Only the top 10 per cent of funds are awarded five FE Crowns under the methodology, with the rankings rebalanced twice a year. The latest batch of ratings have just been awarded so in the below article we explore the funds won the maximum score as soon as they hit their three-year anniversary.
IA UK All Companies
The £39.8m TB Garraway UK Equity Market fund, which is managed by David Urch, was launched in May 2012 and since then has posted a first-quartile total return of 75.11 per cent, beating its FTSE 350 benchmark’s rise by 30 percentage points in the process.
Performance of fund vs sector and index since launch
Source: FE Analytics
Our data shows the fund has scored highly on metrics such as alpha generation, annualised volatility, maximum drawdown and Sharpe ratio since inception, sitting in the peer group’s first quartile for all.
Urch, who has worked at Mercury Asset Management, Martin Currie, SWIP and Fidelity over his career has a largely bottom-up process that seeks to identify companies on the brink of positive change before this is recognised by the market.
Current top holdings include Ashtead Group, Howden Joinery, International Consolidated Airlines, ITV and Entertainment One.
IA UK Equity Income
MGTS Ardevora UK Income has won a five FE Crown rating after posting a 74.19 per cent gain since launch in April 2012, compared with a 50.19 per cent average return in the IA UK Equity Income sector. This ranks it eighth in the peer group for total return.
The portfolio is managed on a third-party basis by Ardevora for Margetts Fund Management and is based on the £229.5m Ardevora UK Income fund, which is managed by Jeremy Lang and William Pattisson.
Lang and Pattisson have a unique investment approach, which aims to capitalise on their belief that investors, financial analysts and company managers are prone to irrational behaviours that can be exploited.
In investors, they look for signs of excessive anxiety or over-exuberance; in analysts, for overconfidence, blinkering or buying into firm’s narratives; and in management, indications of hubris, denial and excessive risk taking.
The fund’s top holdings include Cable & Wireless, Greene King, Next and Mondi. It has 22 per cent of assets in consumer cyclical companies, 15 per cent in communication services and 9 per cent in consumer defensives.
IA Sterling Strategic Bond
PFS Focus Bond is managed by Aza Teeuwen, Ben Hayward, Eoin Walsh, Felipe Villarroel, Gary Kirk, Rob Ford and Douglas Charleston, from fixed income boutique TwentyFour Asset Management.
Since launch in February 2012, it has made a 34.42 per cent total return – which places it in the first decile of the IA Sterling Strategic Bond sector. It is also first quartile when it comes to most metrics, including alpha, maximum drawdown, annualised volatility, maximum gain and Sharpe ratio.
Performance of fund vs sector since launch
Source: FE Analytics
The fund aims to provide an “attractive” level of income with the opportunity of capital growth and takes a flexible approach to fixed income markets, investing across government, investment grade and high yield debt as well as asset-backed securities and other bonds such as emerging market sovereign or bank capital perpetual bonds.
IA Flexible Investment
Sarasin Fund of Funds Global Equity is a multi-manager product, managed by Sam Jeffries and Lucy Walker. It launched in June 2012 and has been the 14th highest returning fund in the sector with a second-decile 54.50 per cent total return.
The managers aim to build a portfolio that is genuinely diversified and are keen for it too look different to other multi-manager offerings. This is shown through its top holdings, which include less familiar names such as Vulcan Value Equity, Legg Mason Opportunity, Verrazzano European Advantage and Memnon European.
Earlier this year, Walker highlighted to FE Trustnet a number of fund selection myths that she is conscious to avoid, including picking the highest rated portfolios, regarded flagship funds as safe havens and assuming outperforming managers must be skilled.
IA Mixed Investment 20%-60% Shares
Two funds from this popular sector have won their first five crown rating: Jeffries and Walker’s Sarasin Fund of Funds Global Strategic Growth and James Foster and Jacob de Tusch-Lec’s Artemis Monthly Distribution.
Performance of funds vs sector over 3yrs
Source: FE Analytics
Sarasin Fund of Funds Global Strategic Growth has a similar approach to the previously mentioned Sarasin Fund of Funds Global Equity, but has to stick within the sector’s guidelines when it comes to asset allocation.
This means its top holdings are gilt and corporate bond portfolios, although it also holds equity funds in common like Vulcan Value Equity and Verrazzano European Advantage.
Unlike the above fund, Artemis Monthly Distribution invests in direct securities with Foster looking after the bonds and de Tusch-Lec overseeing the equities. It aims to provide an income with capital growth; both managers run income mandates within Artemis’ range.
The fund is currently the best performer in the IA Mixed Investment 20%-60% Shares sector over three years, following its 45.96 per cent total return. It is also outperforming its average peer over one year as well as over three and six months.
IA Mixed Investment 40%-85% Shares
PFS Hawksmoor Distribution is another multi-manager fund and also has the aim of providing its investors with income and the prospect of capital growth. Since launch in April 2012 it has made a first quartile 40.79 per cent, when its average peer made 31.08 per cent.
Performance of fund vs sector since launch
Source: FE Analytics
The portfolio has just under two-fifths of its assets in UK funds, with around one-quarter in Europe, 17.6 per cent in the US and 8.4 per cent in Japan. It currently has 60.6 per cent in equities, tending to like funds that operate in specialist areas and are managed by experienced teams.
Top holdings include Fidelity Global Enhanced Income, RWC Enhanced Income, Royal London Short Duration Global High Yield Bond, Guinness Global Equity Income and Legg Mason Income Optimiser.
IA Specialist and IA Unclassified
Three funds from these sectors, which are somewhat of a mixed bag, have been awarded five FE Crowns at their first rating.
Invesco Perpetual Global Financial Capital is managed by Paul Causer and Paul Read, with Julien Eberhardt. It specialises in the bonds issued by financial services companies and was launched to take advantage of restructuring within the sector, achieving a 78.70 per cent total return since inception in January 2012.
Matthew Dobbs and Richard Sennitt’s Schroder Small Cap Discovery, which specialises in smaller Asia ex Japan and emerging market businesses, has made 33.40 per cent since it was launched in March 2012.
Thesis’ The Saint Martins portfolio is the only fund from the IA Unclassified sector. It’s up 21.11 per cent over three years.