Investors often look at a fund’s past performance to assess whether they want to buy it or not but this comes with a serious drawback.
While older funds have the benefit of a long track record that can be assessed, typically by the time they are on investors’ radars they have already done well. As such, investors could overlook some quality funds that were launched more recently.
Most often, investors like to wait at least three years before making a decision, as this gives them enough time to figure out the style and the new manager.
In this series, Trustnet looks at the three-year-old funds and highlights the ones that investors may have missed, as well as if investors were right or wrong to avoid the new crop of funds as a collective.
In the first part we looked at mixed-asset funds, highlighting those that have beaten their peers since launch. We looked solely at actively managed portfolios within the IA Mixed Investment 40-85% Shares, IA Mixed Investment 20-60% Shares and IA Mixed Investment 0-35% Shares sectors.
Source: FE Analytics
Nine of the 21 multi asset funds that were launched in 2019 were top-quartile performers in their respective sectors over the past three years, suggesting that investors could have missed out on above-average returns.
However, more than half (57.1%) of the funds in the study underperformed their peers, with more than a quarter (28.6%) sinking to the bottom quartile. It means that, on average, investors were more likely to pick miss than a hit, but they still could have made a strong return if they’d allocated to the diamonds in the rough.
IA Mixed Investment 40-85% Shares
The LF Waverton Charity Growth & Income fund delivered the highest return of any other multi-asset portoflio over the past three years (to last year end), climbing 14.2% over the period.
Although it is one of the youngest funds in the IA Mixed Investment 40-85% Shares sector, it beat its peers by 9.1 percentage points. Despite this impressive performance, the fund managed by Ian Enslin and James Pike is still relatively small with assets under management (AUM) of £55m and it is currently unavailable to retail investors.
Total return of fund vs sector over 3yrs (to last year end)
-1.png)
Source: FE Analytics
Coming in closely behind was the Premier Miton Diversified Balanced Growth fund, which climbed 13.5% over the past three years (to last year end), beating the sector average by 8.4 percentage points.
The £90.4m portfolio was launched in March 2019, when it joined the existing funds in manager Neil Birrell’s Diversified fund range – he currently manages six multi-asset funds investing across equities, fixed income, property and alternatives.
There is quite a high overlap between holdings across the range, according to Juliet Schooling Latter, research director at FundCalibre, but the exposure is adjusted to the risk level of each portfolio.
She said that Birrell’s fund range is one of her top picks for multi-asset exposure, stating: “Performance has been excellent, with the strength behind the process being the broad team of investment specialists at Premier Miton – who are all involved in the asset allocation process, before a devolved approach to the management of the individual asset classes.”
Total return of fund vs sector over 3yrs (to last year end)
-2.png)
Source: FE Analytics
The M&G Charity Multi Asset fund also outperformed the IA Mixed Investment 40-85% Shares sector since launching three years ago despite some difficulties early on.
In its first full year in 2020, the £191m fund dropped 3.2%, dragging it down to the bottom. It swiftly recovered the next year, however, and went on to become the third best performing fund in the sector in 2022.
Overall, the fund managed by Tristan Hanson and Stuart Canning made a total return of 10.4% over the past three years (to last month end), beating its peers by 5.3 percentage points.
Total return of fund vs sector over 3yrs (to last year end)
-1.png)
Source: FE Analytics
IA Mixed Investment 20-60% Shares
Of the nine IA Mixed Investment 20-60% Shares funds launched in 2019, Premier Miton Diversified Cautious Growth delivered the best performance over the past three years.
It was the second fund added to Birrell’s Diversified range in 2019 and has taken in slightly less cash than its higher-risk sibling with £67m in AUM.
The fund was up 13.2% over the past three years (to last year end), compared to a modest 0.5% from the rest of the sector, and maintained a top-quartile position in each of the past three years, providing investors with top performance despite market volatility.
Total return of fund vs sector over 3yrs (to last year end)
.png)
Source: FE Analytics
The LF Canlife Diversified Monthly Income fund also delivered top-quartile returns every year but 2020, and even then, it was still up 2.7%.
Over the past three years, the £39m portfolio climbed 11.3% and beat its peer group by 10.9 percentage points. Manager Craig Rippe has run the fund since it launched in June 2019, with Jordan Sriharan joining alongside him at the start of last year.
Total return of fund vs sector over 3yrs (to last year end)
-2.png)
Source: FE Analytics
The only other fund to reach the top quartile over the first three years was IFSL YOU Multi-Asset Blend Balance, which climbed 7.5% over the period. The £160m fund has been managed by Shane Balkham since inception, with Cormac Nevin coming in board the following year.
IA Mixed Investment 0-35% Shares
Only one fund was launched in the IA Mixed Investment 0-35% Shares sector in 2019 and its first three years in the market were challenging.
The JPM Multi-Asset Cautious fund was down 6.6% over the past three years (to last year end), sinking it 1.8 percentage points below its peer group.
Total return of fund vs sector over 3yrs (to last year end)
-2.png)
Source: FE Analytics
It landed in the third quartile over its first full three years in operation, with strong performance in 2021 keeping it from falling it to the bottom.
Returns were in the top quartile back in 2021, climbing 5.4%, but this period of outperformance was sandwiched between two years at the bottom of the sector.