Skip to the content

The global funds sitting bottom decile for (almost every) metric you can think of

10 June 2016

After looking at some of the funds at the top of the IA Global sector on a wide spread of metrics, FE Trustnet reveals some of those at the very bottom.

By Gary Jackson,

Editor, FE Trustnet

Resources and energy funds such as First State Global Resources and Schroder ISF Global Energy as well as non-specialised offerings such as Old Mutual Voyager Global Dynamic Equity and Neptune Global Equity are among those that are currently in the IA Global sector’s bottom decile for a wide range of performance and risk metrics over the past five years.

As part of an ongoing series, FE Trustnet has been highlighting the funds have the highest 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 turn 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.

In addition to looking at those that have generated the best results for investors over the past five years – our recent study on the IA Global sector ranked Fundsmith Equity, Old Mutual Global Equity and Rathbone Global Opportunities very highly – we’ve also started to flag up those showing the worst relative performance in their peer group.

5yr rolling returns of sector vs index over 10yrs

 

Source: FE Analytics  

As regular readers of FE Trustnet will know, the average global fund seems to have a difficult time outperforming the market. The graph above shows the rolling five-year total return of the IA Global sector against the MSCI AC World for the past decade; as can be seen, the sector has tended to lag the index, especially in recent years.

Indeed, the average global fund stacks up poorly compared with the MSCI AC World on a number of metrics, giving investors a slightly more volatile ride, failing to make the most of rising markets and falling harder than the index in downturns.

 

Source: FE Analytics  

As the table on the following page (which shows the funds in the bottom 20 places in our study) makes clear, global funds that specialise in natural resources and energy went through a very tough time over the five years to the end of 2015.

Three funds in the sector have a score of 100 in this research, meaning they were 10th decile for every metric looked at, and all three of them focus on resources or energy. The reasons behind their disappointing returns are obvious – the price of many key commodities have plunged over recent years, severely hurting the companies whose businesses are based on their extraction or distribution.


 

Source: FE Analytics  


Schroder ISF Global Energy sits at the top of the table, following its 62.58 per cent loss over the five-year period in question. The figures used in this study are the fund’s performance against the MSCI AC World, however, which is not the fund’s benchmark.

When compared against MSCI World Energy Sector, the fund’s performance does look better (in a relative sense) but it has still significantly underperformed from total return, volatility, maximum drawdown and downside capture points of view. It has managed to gain more than the index in rising markets, though.

Performance of fund vs sector and indices over 5yrs to end of 2015

 

Source: FE Analytics  

Over 2016 so far, the fund has jumped to the top of its peer group on the back of the strong rebound that has taken place in commodity markets. Its 23.47 per cent total return means that it is the second highest returner of the 257-strong IA Global sector, where the average member is 2.47 per cent down over this five-month period.

Schroder ISF Global Energy, which is managed by John Coyle and Mark Lacey, is overweight the oil & gas exploration and production sector and its biggest holdings are the likes of Royal Dutch Shell, ConocoPhillips and Schlumberger.

It’s a very similar story with the second fund on the list: Joanne Warner’s First State Global Resources, which also scored 100. The £410.1m fund lost 62.22 per cent over the five years to the end of 2015, outperforming the 66.20 per cent fall in its 75 per cent Euromoney Global Mining 25 per cent MSCI AC World Energy benchmark.

However, the rapid rally in commodity prices over 2016 (the Bloomberg Spot Commodity index has made a 21.86 per cent) has buoyed the fund. While it is lagging its benchmark by around six percentage points, its 32.04 per cent gain means it’s the best performer in the sector over the year to date.

While nine of the 20 IA Global funds with the worst scores in this study have a specialist focus on sectors such as energy, mining, industrials or financials, there are plenty with a more generalist approach that have turned out bottom-decile numbers.

Old Mutual Voyager Global Dynamic Equity is in sixth place overall after racking up a score of 95. The fund is in the 10th decile for five-year returns, returns in 2015, alpha generation, maximum drawdown, Sharpe ratio and downside capture, as well as being in the eighth or ninth decile for the other metrics.

Performance of fund vs sector and indices over 5yrs to end of 2015

 

Source: FE Analytics  


It’s important to note that current managers Anthony Gillham and Lee Freeman-Shor only took over the portfolio in September 2015; prior to that it was managed by Francois Zagame, who has left Old Mutual Global Investors.

Aberdeen and Neptune each have two funds in the list of 20.

Aberdeen Ethical World Equity and Aberdeen Global World Equity have respective scores of 92 and 82. Both are managed by Aberdeen’s global equity team but a major difference is that the former can only invest in companies that meet ethical and socially responsible criteria.

Like some of the other funds mentioned in this article, they have had somewhat of turnaround in 2016 and are currently in the sector’s top quartile for the year to date.

Robin Geffen runs both Neptune Global Special Situations, which scored 90, and Neptune Global Equity, scoring 87. Geffen’s global funds have significant weightings towards the US and Japan, but the manager recently said he is looking to build up exposure to emerging markets again.

However, both funds currently hold the bottom two places in the IA Global sector after making losses of more than 7.5 per cent.

FE Trustnet Registration

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

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.