The likes of Fidelity, Miton, Investec and Marlborough have all introduced new offerings to the Investment Association universe over the last three years that have already achieved top-decile total returns versus their peer group composites, according to FE Analytics.
It is often challenging for new funds to step up to the plate when compared to older funds in the sector, given that many investors will wait until an investment vehicle has built up a reasonably long track record before buying in.
On the other hand, if a new fund goes on to do well over the longer term, those that have bought in earliest will reap the highest rewards.
FE Trustnet has taken a look at all the major equity sectors within the Investment Association and has dug out the funds that were launched after the start of 2013 and have achieved a top-decile total return over either six months, one year or three years.
The usual adage that past performance is no guide to future performance must be taken into account, however, and investors should note that these performances are over relatively short time frames.
In the IA UK All Companies sector, David Taylor and James Baker’s Chelverton UK Equity Growth fund is the runaway top-performer over one year out of all funds in the sector launched after the start of 2013.
The fund, which is £29.6m in size, has achieved a total return of 10.11 per cent over 12 months, which is 11.38 percentage points more than the second highest-performing newbie.
Since its launch in October 2014, it has also more than quadrupled its sector average and beaten its FTSE All Share benchmark more than seven times over with a total return of 31.17 per cent. Over the same time frame, it is in the top quartile for its annualised volatility, its maximum drawdown (which measures the most potential money lost if bought and sold at the worst possible times) and its Sharpe ratio (which measures risk-adjusted performance).
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The fund has a bias towards smaller companies as both managers are utilising their experience in the small-cap space. Taylor has managed small-cap retail funds since 1995 and was head of smaller companies at HSBC for several years, while Baker has more than 30 years of equity market experience on both the buy and sell sides, having specialised in UK small and mid-caps over this time.
Chelverton UK Equity Growth has a portfolio of 80 stocks and aims to invest in stocks that have a dominant position in their market, have high margins and are highly cash generative so can fund their own growth.
The second new fund in the IA UK All Companies space to have performed well is Miton UK Value Opportunities, which is headed up by FE Alpha Manager George Godber and Georgina Hamilton. However, it must be noted that both managers are due to leave for Polar Capital and the fund will soon be headed up by former EdenTree UK growth manager Andrew Jackson.
The final fund in the sector that was launched after the start of 2013 and has delivered a top-decile performance is 7IM UK Equity Value, which was launched in April last year and is managed by the 7IM Investment Management team.
The £126m fund is in the top decile for its total return over three and six months and is in the second quartile for its performance over the last year, making a loss of 5.65 per cent compared to its sector average’s loss of 7.71 per cent.
The fund holds 59 stocks and its list of top 10 holdings comprises of large and mega-caps such as Shell, Rio Tinto, HSBC and Reckitt Benckiser.
In terms of its risk metrics, it is it is in the bottom quartile for its annualised volatility and maximum drawdown and has a below-average Sharpe ratio, suggesting it may not be well-suited to the more cautious investor.
Over in the IA UK Equity Income sector, it will come as no surprise to investors that CF Woodford Equity Income has taken the top spot for best-performing retail fund over the last year, having lost 0.99 per cent which is more than seven times less than its average peer.
The only other retail fund to have achieved a top-decile return over six months or one or three years is COURTIERS UK Equity Income Retail, although this fund is only £7.6m in size and is unavailable on most investment platforms.
Moving further down the cap spectrum and into the IA UK Smaller Companies space, the stand-out newbie is Marlborough Nano Cap Growth, which was launched by David Walton, Guy Feld and FE Alpha Manager Giles Hargreave in October 2013.
The £99m fund has achieved a top-decile performance over the last six months and is in the top quartile over three months and one year. Since launch though, it has returned 11.71 per cent which is broadly in line with its FTSE Small Cap (ex IT) index and a 2.47 percentage point underperformance versus its peer group composite.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
However, it must be noted that Marlborough Nano Cap Growth aims to outperform its benchmark over the long term and does not yet have a long track record.
The fund, which has a lower-than-average annualised volatility and maximum drawdown, will only invest in companies that have a market cap of less than £100m at the time of investment and holds a portfolio of 141 stocks.
Over in the IA Global sector, there is also only one fund that has been launched after the start of 2013 that has achieved a top-decile performance over a regular time frame.
Ardevora Global Long Only Equity, which is managed by a team of five including FE Alpha Managers Jeremy Lang and William Pattisson, has achieved top-decile total returns over three months and one year, as well as achieving top-quartile returns over the last one and six months.
The fund was launched in November 2013 and invests in large and mid-cap global equities, although its emerging markets exposure is not expected to exceed 35 per cent of its NAV.
The £265m fund has a top-quartile maximum drawdown and Sharpe ratio since its launch, although it does have a higher-than average annualised volatility over this time frame.
Since its launch, the fund has returned 30.25 per cent compared to its sector average’s return of 12.98 per cent and its MSCI AC World benchmark’s return of 19.06 per cent.
Performance of fund vs sector and benchmark
Source: FE Analytics
There is also only one top-decile performer in the IA Global Equity Income space that was launched after the start of 2013.
Fidelity Global Enhanced Income, which has achieved a top-decile total return over the last year, was launched by Daniel Roberts and David Jehan in October 2013.
While Jehan runs the call option strategy at Fidelity and has 14 years of derivatives experience, Roberts has managed equity income portfolios since 2003.
The fund is £112m in size and currently holds 109 stocks, although it also has a cash weighting – which is spread across various currencies - of 19.75 per cent.
Since its launch, the fund has achieved a return of 32.6 per cent, outperforming its sector average and benchmark by 15.83 and 8.85 percentage points respectively. It currently yields 3.86 per cent.
Over in the more region-specific sectors, other new funds that have got off to a flying start are Guinness European Equity Income which is top-decile over three and six months as well as top-quartile over one year, Fidelity Asia Pacific Opportunities which is in the top decile over three months, six months and one year, First State Japan Focus which is top-decile over one, three and six months, and CF Miton US Opportunities, which is in the top decile over three months, six months and one year.
