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The balanced funds that might have benefitted from manager skill rather than luck

12 July 2023

Trustnet finds that five IA Mixed Investment 40-85% Shares funds have consistently outperformed on the information ratio.

By Gary Jackson,

Head of editorial, FE fundinfo

Royal London Sustainable World and Vanguard LifeStrategy 80% Equity are among a handful of multi-asset funds that have thrived over the past decade thanks to manager skill, research by Trustnet suggests.

In this series, we’re looking for funds that have consistently had the highest information ratios – a metric that is used to determine when returns are down to skill rather than luck. It is a risk-adjusted measure designed to reflect the ability of a fund manager in generating excess returns relative to a benchmark.

The ratio is calculated by taking the portfolio's active return (the difference between the portfolio return and the benchmark return) and dividing it by the tracking error, which is the standard deviation of the active return. A higher ratio indicates a better risk-adjusted performance.

Using the average fund as the benchmark, Trustnet ran the information ratio of each IA Mixed Investment 40-85% Shares fund over the past 10 full calendar years as well as 2023 to the end of June. We sorted them by quartile to see which have spent the most time at the top of the sector for this measure.

Royal London Sustainable World Trust since start of 2013


Source: FE Analytics. Total return between 1 Jan 2013 and 30 Jun 2023

Coming in first place is the £2.8bn Royal London Sustainable World Trust, which is run by FE fundinfo Alpha Manager Mike Fox, George Crowdy and Sebastien Beguelin. It has a top-quartile information ratio in eight of the 11 periods examined by this research.

Furthermore, its 225.3% total return over the entire period under review is the highest in the IA Mixed Investment 40-85% Shares sector.

The process behind the fund filters out businesses with exposure to negative issues or controversial products then looks for those that are actively working to contribute to a more sustainable society.

Analysts at Square Mile Investment Consulting and Research said: “We like the fact that the team strongly believes that it can add value as a consequence of its process and not that it limits the fund's potential returns. The team are aware that their main strength is the process and its output.

“We see the fund as a strong option for investors who wish to invest in a mixture of equities and bonds from companies with sustainable business practices.”


Source: FinXL

As the table above shows, another four funds from the IA Mixed Investment 40-85% Shares sector have a first-quartile information ratio for more than half of the 11 periods examined in this research.

Vanguard LifeStrategy 80% Equity is in second place with seven periods in the top quartile for information ratio. Its 137.2% total return over the entire period is also a first-quartile result.

With assets of just under £9bn, it’s also the second biggest in the sector, outsized only by its Vanguard LifeStrategy 60% Equity sibling (which was only in the top quartile for information ratio in two of the 11 periods reviewed).

Vanguard’s LifeStrategy range has proven to be a popular choice for both professional and private investors, thanks to its low fees, automatic rebalancing back to a static allocation and strong returns.

The remaining three funds all have six periods in the first quartile for information ratio with Liontrust Sustainable Future Managed and BNY Mellon Multi-Asset Global Balanced combining this with top-quartile total returns. Invesco Managed Income, meanwhile, made a second-quartile return over the period examined.

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