Scottish Widows UK Select Growth, Halifax Special Situations, M&G Recovery, Elite Charteris Premium Income and Halifax UK Equity Income are some of the funds that are languishing in their sector’s bottom decile on a wide range of performance and risk metrics, according to research by FE Trustnet.
Over recent weeks, we’ve been highlighting the funds that tick almost all the boxes for investors by looking at decile rankings for the cumulative five-year returns up to the end of 2015 as well as the annual returns of 2015, 2014 and 2013, annualised volatility, maximum drawdown, downside capture, alpha generation, Sharpe ratio and upside capture.
We turned these 10 decile rankings into a score, where a ‘10’ shows a fund has been first decile in each metric and a ‘100’ would indicate 10th decile performance in each.
We’ve already looked at the IA UK All Companies and IA UK Equity Income sectors, finding that CF Lindsell Train UK Equity, Neptune UK Mid Cap and Royal London Sustainable Leaders Trust were on top in the former peer group while Evenlode Income, Threadneedle UK Monthly Income and MI Chelverton UK Equity Income led the latter.
Performance of funds vs sector and index over 5yrs to 31 Dec 2015
Source: FE Analytics
The above graph shows the outperformance of the IA UK All Companies funds over the time frame covered by the study and it’s a similar story for those highlighted from the equity income peer group. However, we thought it would also be useful to see the funds from these sectors that have gone through a more challenging five years.
The table on the following page reveals the IA UK All Companies funds in the 20 bottom places of our study, meaning they have underperformed their average peer by a significant margin on most, if not all, of the 10 metrics looked in the research.
Scottish Widows UK Select Growth sits in the bottom spot after accumulating a score of 97 out of 100. It is in the bottom decile of its peer group for every metric we analysed aside from annualised volatility, where it sat in the seventh decile.
Performance of fund vs sector and index over 5yrs to 31 Dec 2015
Source: FE Analytics
The portfolio is managed by the Aberdeen’s pan-European equity team (the group bought Scottish Widows in 2014). Since the Aberdeen team took over, the fund is still in the bottom decile but it has moved into the fourth decile during 2016 to date – although it is still lagging the FTSE All Share.
Source: FE Analytics
The second fund on the list – Halifax Special Situations – is currently bottom decile over one, three, five and 10-year periods. Over the past decade it has made a total return of just 9.31 per cent, compared with a 69.58 per cent return from its average peer and a 65.78 per cent gain in the FTSE All Share.
The £150.1m fund is only available to Halifax customers and its ongoing charges figure (OCF) of 1.60 per cent includes the cost of advice from the bank. It is managed by the same team that runs Scottish Widows UK Select Growth and has only outperformed that fund through having slightly better annualised volatility and maximum drawdown numbers.
One of the more notable names on the list is Tom Dobell’s M&G Recovery fund and its score of 90. With assets of £3.4bn, it is the 10th largest of the 272 funds in the IA UK All Companies sector but is in the bottom decile for five-year returns to the end of 2015 (as well as during 2013, 2014 and 2015), alpha generation, Sharpe ration and upside capture.
What’s more, it’s long-term track record of outperformance has been dented: the fund has made 55.05 per cent over the past 10 years, which means it is now lagging both its average peer and the FTSE All Share. It has, however, beaten its average peer over the year to date with a 0.19 per cent gain (the sector is down 0.63 per cent).
Performance of fund vs sector and index over 5yrs to 31 Dec 2015
Source: FE Analytics
Turning to the IA UK Equity Income sector and Elite Charteris Premium Income is in bottom place with a score of 99. This means the fund is in the tenth decile for every metric looked at in this study aside from maximum drawdown – where it’s in the ninth decile.
The fund is benchmarked against the FTSE 100 and has the aim of outperforming UK blue-chips, but our data shows it is behind the index on one, three and five-year views. Over the five years to the end of 2015, it made a 0.57 per cent total return while the FTSE 100 gained 26.89 per cent.
Performance of fund vs sector and indices over 5yrs to 31 Dec 2015
Source: FE Analytics
The table on the following page shows the 10 IA UK Equity Income funds with the lowest scores in this study. We’ve included fewer than before as this peer group is a lot smaller than the IA UK All Companies sector.
Source: FE Analytics
While Elite Charteris Premium Income has assets of just £10.74m, not all the funds mentioned here are small.
Halifax UK Equity Income, the second worst performer, is the sixth largest portfolio in the peer group with assets under management of £2.4bn. There’s another £585.1m in the Scottish Widows UK Equity Income fund, which is managed by the same team as Halifax UK Equity Income.
