Sanlam FOUR Active UK Equity, Halifax Special Situations and M&G Recovery are some of the funds sitting in the IA UK All Companies sector’s bottom decile for a wide range of closely watched metrics, research by FE Trustnet shows.
In an article earlier this week, we revealed the UK funds that have the highest average decile ranking when it comes to cumulative five-year returns, the three most recent individual calendar years, annualised volatility, maximum drawdown, alpha generation, Sharpe ratio, downside capture and upside capture.
Leading the pack in the IA UK All Companies sector was FE Alpha Manager Keith Ashworth-Lord’s CFP SDL UK Buffettology fund, followed by CF Lindsell Train UK Equity, Liontrust Special Situations, Evenlode Income and Royal London Sustainable Leaders Trust.
In this follow-up article, however, we look at the funds that have the highest average decile ranking and are thereby at the bottom of the peer group on many of the metrics considered.
Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016
Source: FE Analytics
The chart above shows the fund that has come bottom in our study: Chris Rodgers, Tom Carroll and Alex Schlich's Sanlam FOUR Active UK Equity fund, which has an average decile ranking of 9.4.
With a 42.5 per cent return between 1 January 2012 and 31 Dec 2016, the £81.8m fund is in the sector’s tenth decile for total returns, as well as for alpha generation, annualised volatility, maximum drawdown, Sharpe and upside capture.
The only areas where it broke out of the bottom decile are for downside capture and total returns in 2015 and 2016. In each of these, the fund is in the eighth decile.
But Sanlam FOUR Active UK Equity is not the only fund in the lower deciles of the IA UK All Companies sector for a range of metrics. The table below reveals the 30 funds with an average decile ranking higher than 7.5, along with their total return for the period examined.
Source: FE Analytics
Within that list are some prominent funds that run a lot of investor money.
Tom Dobell’s M&G Recovery fund is one of the better-known names on the list, thanks to a strong long-term track record and assets under management that peaked at more than £8bn. It has an average decile ranking of 8.8 in this study.
However, the fund – which has declined to £3.2bn in size today – has endured a difficult period more recently and sits in the IA UK All Companies sector’s bottom decile for total returns over the five years examined in this research, making just 32.1 per cent.
M&G Recovery did turn in a top-decile 20.69 per cent return in 2016 as the value style came back into favour, but it is still in tenth decile for alpha generation, maximum drawdown, Sharpe ratio, upside capture and downside capture.
Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016
Source: FE Analytics
While M&G is the largest of 30 funds highlighted in the table, another seven have assets under management in excess of £500m.
Scottish Widows UK Growth, which has an average decile ranking of 8.4 and made 44.3 per cent between 2012 and 2016, is the next largest with assets of £2.9bn.
This fund is in the tenth decile for five-year returns, alpha generation, Sharpe ratio and downside capture. Its highest decile score is for returns in 2016, when it sits in the fifth decile with a 12.95 per cent gain.
Other active IA UK All Companies funds on the list that run more than £500m are Dimensional UK Value (with an average decile ranking of 7.9), Royal London UK Growth (7.8, although this fund was given a new manager in 2016), Standard Life TM UK Equity General (7.8) and Santander UK Growth Unit Trust (7.7).
All these funds failed to beat their average peer and the FTSE All Share over the five-year period we looked at, although a handful are sitting in the upper deciles on some metrics.
Performance of funds vs sector and index between 1 Jan 2012 and 31 Dec 2016
Source: FE Analytics
The £545.4m Dimensional UK Value fund, for example, made a top-decile 20.69 per cent total return in 2016, while its five-year upside capture of 116.4 per cent puts in the second decile here.
Santander UK Growth Unit Trust, which has been managed by Graham Ashby since February 2015 and has assets of £884.3m, is in the second decile for maximum drawdown (at 9.72 per cent) and is in the third quartile for 2015 returns.
Over the coming weeks, FE Trustnet will be looking at the best and worst funds in the main Investment Association sectors according to these 10 metrics – with the IA Global sector being the next in the spotlight.