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How the most equity-heavy unfettered funds stack up against their fettered peers

Having compared performance of fettered and unfettered funds, FE Trustnet drills down into the individual sectors. In the last in the series FE Trustnet looks at the IA Mixed Investment 40%-85% universe.

Jonathan Jones

By Jonathan Jones, Reporter, FE Trustnet
Friday February 17, 2017

The IA Mixed Investment 40%-85% sector is one of the most competitive sectors when broken down, according to data from FE Analytics

A previous study had found that fettered multi-manager funds in the IA Mixed Investment 40%-85% sector had outperformed their unfettered rivals over 10 years by 17.4 percentage points – the widest margin of any sector.

Unfettered strategies were also beaten in the IA Flexible, IA Mixed Investment 0%-35% and IA Mixed Investment 20%-60% sectors, which we have previously looked at.

Traditionally, unfettered funds are considered to have an advantage with the ability to invest in a wider pool of funds compared with their fettered rivals. However, this has not always been born out over the long-term.

Over five years – the performance period considered in this study – dispersion between the two is reduced to 6.51 percentage points, as the below graph shows.

Performance of indices over 5yrs


Source: FE Analytics

We have shortened the timeframe to five years to capture more funds, providing 51 unfettered and 10 fettered funds for comparison.

Looking more closely at the IA Mixed Investment 40%-85% sector, nine unfettered funds have outperformed the average fettered fund over the past half-decade.

The fund with the best performance of the period is the Premier Multi-Asset Growth & Income run by David Hambidge, Ian Rees, Simon Evan-Cook and David Thornton.

The five crown-rated fund has returned 81.19 per cent to investors – 25.48 percentage points ahead of the average fettered fund.

The £478m fund is 37.4 per cent weighted to international equities, 19.1 per cent to UK equities and 9.2 per cent in alternatives.

In its latest factsheet, Square Mile Research said: “They have an excellent appreciation of the outcomes that investors seek and this well diversified portfolio has historically generated performance that has met its objectives.”

The fund has a clean ongoing charges figure (OCF) of 1.71 per cent and currently yields of 2.28 per cent.

The next best performer is the four crown-rated Old Mutual Cirilium Moderate run by FE Alpha Manager Paul Craig, which has returned 65.79 per cent over the last five years.

The £1.4bn fund has a higher weighting to alternatives than the Premier fund (25.3 per cent) split among 29 holdings including Catco Reinsurance Opportunities and Harbourvest Global Private Equity.

The fund has an OCF of 1.24 per cent and a yield of 0.95 per cent.

Performance of funds over 3yrs

Source: FE Analytics

Rounding out the top three is the £1bn HL Multi Manager Balanced Managed fund run by David Smith and Roger Clark.

The fund favours managers with proven stock-picking skills and looks to top up exposure during periods of market weakness.

In its latest factsheet the managers wrote: “We remain cautious towards bond markets, and retain a preference for ‘strategic’ bond funds with flexibility to try to seek shelter from potential troubles or take advantage of opportunities when they arise.

“Exposure to ‘total return’ funds is also maintained, which have the potential to offer a degree of shelter to investors’ capital during tougher times.”

The fund’s top holding is Findlay Park American (7.5 per cent) with Man GLG Japan CoreAlpha (7.1 per cent) and CF Woodford Equity Income (6.9 per cent) making up the rest.

Also of note is the four crown-rated Scottish Widows Progressive Portfolio, run by Mark Henzell, which unlike the others, uses only two houses for its multi-manager approach.

The £224m fund is 30.8 per cent weighted to US equities, 30 per cent UK equities and 20.4 per cent overseas bonds.

Its largest holding is Russell Investments’ US Equity fund, in the fund’s interim results the fund counted 14 Scottish Widows and Russell Investments funds

The fund has an OCF of 2 per cent and currently yields 0.5 per cent.

Of the unfettered funds, only Premier Multi-Asset Growth & Income has outperformed the best fettered fund, however.

Indeed, the five crown-rated Vanguard LifeStrategy 80% Equity has returned 70.97 per cent over the past five years, as the below graph shows.

Performance of funds and sectors over 5yrs


Source: FE Analytics

The £1bn fund, run by the European equity team, uses predominantly passive and index-tracking investment schemes.

Its top holdings include the Vanguard FTSE Developed World ex-U.K. Equity (19.3 per cent), Vanguard U.S. Equity Index Fund (19.2 per cent) and Vanguard FTSE U.K. All Share Index Unit Trust (18.5 per cent).

The fund has an OCF of 0.22 per cent and currently yields 1.54 per cent.

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Data provided by FE. Care has been taken to ensure that the information is correct, but FE 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.

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