Old Mutual Voyager Diversified, Halifax Cautious Managed and Investec Cautious Managed are some of the funds that have fallen to the bottom of the IA Mixed Investment 20%-60% Shares sector’s performance and risk tables over recent years, according to the latest FE Trustnet study.
We recently put the popular sector under the spotlight to see which of its members have most consistently been in the top decile when it comes to 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.
As with previous studies in this series, we added up the 10 decile rankings for each fund in the sector to give a score, whereby a 10 shows a fund has been first decile in each metric and a 100 would indicate 10th decile performance in each.
When looking for the best performers in the sector, the likes of Premier Multi-Asset Distribution, Premier Multi-Asset Monthly Income, HL Multi Manager Equity & Bond, Kames Ethical Cautious Managed and Aviva Investors Distribution were ranked the highest.
The fund that came top in the study was Premier Multi-Asset Distribution, which is headed up by David Hambidge and his team of Ian Rees, Simon Evan-Cook and David Thornton, with a score of just 17.
However, a look at the bottom of the table shows that the worst performing fund in our research has a score of 91: Old Mutual Voyager Diversified.
Performance of fund vs sector and index over 5yr to the end of 2015
Source: FE Analytics
The £726.2m fund made a tenth-decile total return of 11.01 per cent over the five years to the end of 2015 and is the bottom 10 per cent of its peer group for all the other metrics looked at apart from annual returns in 2013 and its upside capture against the FTSE WMA Stock Market Balanced index (which is the benchmark we chose for the study is used none of the funds in the sector).
Old Mutual Voyager Diversified has the aim of achieving long-term capital growth through a diversified portfolio of assets and takes a fund of funds approach. It currently has 44.9 per cent in equity funds, 30.8 per cent in fixed income, 12.7 per cent in alternatives and 11.6 per cent in cash.
It’s important to note that the bulk of the fund’s track record was established under John Ventre, who has since departed Old Mutual Global Investors. It was taken over by Anthony Gillham and Sacha Chorley in September 2015; between then and its most recent pricing, the fund has made 8.26 per cent, which puts it in the ninth decile of the IA Mixed Investment 20%-60% Shares sector.
Source: FE Analytics
As the table above shows, another fund did equal Old Mutual Voyager Diversified’s score of 91 but Barclays Wealth Global Markets 3 made a slightly higher – but still bottom-decile – total return of 13.69 per cent. It is also in the 10th decile for alpha generation, maximum drawdown and Sharpe ratio over the period examined in the research.
In fact, all four of Barclays Wealth’s members of the sector are found in the bottom 20 funds of our study.
The one that has made the best return over the five-year period is Barclays Balanced Portfolio, which is three percentage points behind its average peer after making a ninth-decile 19.77 per cent total return.
The largest portfolio in the bottom 20 is the £3.2bn Halifax Cautious Managed fund, which has been headed up by Matthew Davies of Aberdeen Asset Investments since September 2011. Davies also runs Scottish Widows Balanced Portfolio, which did much better in our study: it’s ranked 21st out of 96 funds after scoring 42.
Halifax Cautious Managed’s 22.07 per cent total return puts it in the eighth decile of the sector over the period in question.
Performance of fund vs sector and index over 5yr to the end of 2015
Source: FE Analytics
As the above chart shows, the fund has been ahead of its average peer during the earlier parts of the five-year period but has underperformed by a wide margin since the start of 2014.
It has moved in to the top quartile over the year to date, however, partly down to its exposure to rallying large-caps like British American Tobacco, BP and Royal Dutch Shell.
Another big name on the list is Alastair Mundy’s £2bn Investec Cautious Managed fund. Mundy is known for his value style but this approach has struggled over recent years as investor nervousness and loose monetary policy led to the outperformance of growth stocks.
It’s worth noting that Mundy has a strong track record on the fund over the long term. According to FE Analytics, Investec Cautious Managed has made a 147.66 per cent 147.66 per cent total return since he took over in August 2002, outperforming the sector average by around 40 percentage points.
Performance of fund vs sector under Mundy
Source: FE Analytics
In addition, it has jumped into the sector’s top decile over 2016 so far with a total return of 12.79 per cent thanks to a bounce in the value style, a rally in the gold price and exposure to overseas equities.
Some investment analysts have a favourable opinion of Mundy and this fund, despite its underperformance over recent years. Square Mile, for example, gives it a ‘AA’ rating and says it might be suitable for investors willing to look beyond periods of lagging returns.
“The process applied means that there could be periods when the style is not rewarded,” the investment consultancy said. “Therefore, the fund might be better suited to investors with an investment horizon of at least one full market cycle. We would expect this to be at least five to seven years in length.”
