M&G Global Dividend, BlackRock European Dynamic and Schroder Asian Alpha Plus are some of the most popular funds to be chosen by leading financial advisers for the more aggressive investor, according to FE Analytics.
The FE Adviser Fund indices are risk-categorised and consist of funds chosen by a panel of 16 advisers, who submit model portfolios of up to 10 holdings that they believe to be best suited to cautious, balanced and aggressive investors.
Taking a look at the higher-octane portfolio - which is ideally modelled for a person in their late 20s – FE Trustnet discusses some of the funds that have proven to be the most popular among panellists over the last two portfolio rebalances.
First up is BlackRock European Dynamic, which has been headed up by FE Alpha Manager Alister Hibbert since 2008.
The £2.1bn fund will have a portfolio of between 35 and 65 holdings at any one time and these will be chosen through a combination of macroeconomic themes and individual company research in order to seek out market inefficiencies.
While Hibbert considers sector trends and overarching themes, he also looks at the factors driving a stock’s share price such as market sentiment, then compares this to a stock’s financial health, level of risk and revenue drivers to decide whether the stock is good value for money.
The four crown-rated fund is currently overweight large-cap and underweight mid-cap, holding no investments within the small-cap space whatsoever. Its largest weightings include the likes of Novo Nordisk, Pandora, RELX Group and German property firm LEG Immobelien.
Over Hibbert’s tenure, BlackRock European Dynamic has provided a total return of 139.64 per cent, outperforming its sector average and its FTSE World Europe ex UK index by 98.27 and 100.55 percentage points respectively.
Performance of fund vs sector and benchmark under Hibbert
Source: FE Analytics
It has also provided an above-average return on an annualised basis every year since 2008 with the exception of 2011, when it lost 17.1 per cent compared to its peer group composite’s loss of 15.57 per cent.
While the fund has achieved a better-than-average maximum drawdown (the most potential money lost if bought and sold at the worst times) with Hibbert at the helm, it has a marginally higher level of annualised volatility than its average peer of 20.84 per cent compared to 19.65 per cent.
The Square Mile research team, who awarded the fund its highest ‘AAA’ rating, said: “The fund aims to outperform across a range of market conditions, a challenging objective for any fund to beat and this may not be achievable in the short run.”
“However, we hold Mr Hibbert in high regard who is suited to the demands of this mandate.”
BlackRock European Dynamic has a clean ongoing charges figure (OCF) of 0.93 per cent.
The next fund on the list is Schroder Asian Alpha Plus, which was launched by Matthew Dobbs in 2007 and is £483m in size.
The fund focuses on the Asia ex Japan region and currently has 64 holdings – 82.19 per cent of these are headquartered in the Pacific Basin, 13.19 per cent are in Asia Pacific and 2.94 per cent are in the UK.
Dobbs adopts a bottom-up approach when selecting these holdings and, while he has a preference for companies with visible, repeatable earnings and sustainable growth opportunities, he is also willing to invest in shorter term opportunities and will take more of a macro-led approach to selecting these.
Because of this, combined with the fact that the manager is able to invest across the cap spectrum, its holdings tend to differ widely from the benchmark and, as its name suggests, it has a top-quartile alpha generation – which measures the most money made in addition to the benchmark – over Dobbs’ tenure.
It also has a top-decile information ratio, which measures the degree of skill and knowledge a manager has used to generate returns, over the same time frame.
The fund has provided a total return of 74.59 per cent over Dobbs’ tenure, compared to its sector average’s return of 31.17 per cent and its benchmark’s return of 31.51 per cent.
Performance of fund vs sector and benchmark under Dobbs
Source: FE Analytics
While it has delivered a strong performance over the longer term though, the fund is in the third quartile compared to its peer group composite over one and three years and is in the bottom quartile over three and six months, suggesting investors should have a view to hold the fund over the long term.
Schroder Asian Alpha plus has a clean OCF of 0.96 per cent.
The third most popular fund in the AFI Aggressive portfolio over the last two turnovers is M&G Global Dividend, which is £5.7bn in size and is run by Stuart Rhodes.
The fund’s portfolio, which consists of 42 holdings, is made up of companies that have grown their dividends for at least 10 consecutive years and includes the likes of British American Tobacco, Wells Fargo and Gibson Energy as some of its largest holdings.
The manager also divides the portfolio into three buckets: quality and sustainable businesses – which make up a majority of the fund, cyclical growth businesses and high growth businesses. These weightings shift depending on market conditions.
Since the fund’s launch in 2008, it has provided a total return of 105.67 per cent, outperforming its sector average and benchmark by 40.55 and 19.09 percentage points respectively. In terms of its risk metrics, the fund has achieved a third-quartile maximum drawdown and annualised volatility over the same time frame, although it does boast top-quartile risk-adjusted returns as measured by its Sharpe ratio.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The Square Mile Research team, who awarded the fund an ‘A’ rating, said: “Overall, this is a thoughtfully constructed investment process and we agree with the premise that an obligation to grow the dividend exerts discipline on company management and that companies which provide consistent dividends should attract a premium valuation in the market.”
“The portfolio is built with a core of solid, reliable dividend paying companies which are supplemented with more cyclically sensitive names and those going through a strong growth phase. The combination of these should allow the fund to remain competitive across a range of market conditions.”
M&G Global Dividend has a clean OCF of 0.91 per cent and yields 3.45 per cent.
Stewart Investors Asia Pacific Leaders
It was announced at the end of last year that the co-manager of Asia Pacific Leaders Angus Tulloch will be taking a step back from managing money at the firm so will therefore hand over control of the fund to co-manager David Gait, who has been at the helm of the fund since July last year.
While this could unsettle some investors, the general consensus from industry professionals is that those who currently own the fund have nothing to worry about.
In an article published shortly after the news broke, Premier’s Simon Evan-Cook told FE Trustnet that his initial thoughts were for investors to refrain from reacting immediately.
“I’ve been lucky enough to meet with Angus and his team quite a bit, and… as a holder of that fund, I would be very comfortable that it’s going to be in good hands going forward.”
FE Alpha Managers Tulloch and Gait look for high quality businesses that are chosen for the strength of their finances as well as their franchise. They also focus on firms’ attitudes towards shareholders, their cash flows, their valuations, their earnings and their company history.
This means that both managers place an emphasis on meeting managers before investing but also keep an eye on the macroeconomic environment, as well as incorporating ESG into their selection process.
This has led to a current portfolio of 46 holdings, 45.8 per cent of which are domiciled in the Pacific Basin, 23.9 per cent are in Asia Pacific, 14.5 per cent are in Australasia and 2.1 per cent are in Japan. The fund also has a 12.8 per cent cash weighting.
The five crown-rated fund has comfortably doubled the performance of its sector and benchmark over the last decade with a total return of 223.33 per cent and has provided a top-decile total return over one, three and five years. It also has a top-quartile annualised volatility, Sharpe ratio and maximum drawdown over the same time frames.
Performance of fund vs sector and benchmark over 10yrs
Source: FE Analytics
Stewart Investors Asia Pacific Leaders has a clean OCF of 0.9 per cent.
