MI Hawksmoor Vanbrugh, Vanguard LifeStrategy 40% Equity and Premier Multi-Asset Distribution are some of the funds that have topped the IA Mixed Investment 20-60% Shares sector on multiple risk and return measures for recent years, FE Trustnet research shows.
The IA Mixed Investment 20-60% Shares sector has been a popular one with investors as its members offer portfolio diversification and relatively cautious positioning.
As part of our annual series, we have compared these funds across 10 metrics: cumulative five-year returns up to the end of 2018 as well as the individual returns of 2018, 2017 and 2016, annualised volatility, alpha generation, Sharpe ratio, maximum drawdown, and upside and downside capture relative to the sector average.
Each fund’s average decile ranking for the 10 metrics has then been worked out to discover which were most consistently at the very top for this wide spread of risk and return measures.
Performance of fund vs sector and index over 5yrs to end of 2018
Source: FE Analytics
Taking the top spot is MI Hawksmoor Vanbrugh, with an average decile ranking of 2.1. The £143.4m fund made a first-decile 31.5 per cent return over the period under consideration; it’s also in the sector’s top decile for alpha, volatility, maximum drawdown, Sharpe ratio and downside capture.
Managed by Daniel Lockyer and Ben Conway, the five FE Crown-rated fund-of-funds is designed to be a core long-term portfolio with a target of delivering returns in excess of CPI over the medium term.
Lockyer and Conway’s investment approach centres around finding the actively-managed funds that are best-placed to capitalise on the significant trends and themes affecting the world economy and its financial markets.
MI Hawksmoor Vanbrugh’s largest holding at present is the Polar Capital UK Value Opportunities fund, followed by Jupiter Absolute Return, Merian Gold & Silver, TwentyFour Monument Bond and Phoenix Spree Deutschland.
In second place is Vanguard LifeStrategy 40% Equity with a score of 2.3. This is a member of the Vanguard LifeStrategy range of five multi-asset funds, which hold underlying Vanguard index trackers and have proven to be consistently popular since launching in 2011.
The £3.4bn fund might be made up of index trackers, but its performance over the five years examined in this research exceeds that of the majority of active strategies in the IA Mixed Investment 20-60% Shares sector. Over the five years to the end of 2018, its 32.86 per cent total return is ranked seventh out of 120 funds.
All the LifeStrategy are automatically rebalanced to maintain their target allocations. Vanguard Group chief executive Mortimer J. Buckley explained the importance of this feature: “Over the years, I’ve found that prudent investors exhibit a common trait: discipline. No matter how the markets move or what new investing fad hits the headlines, those who stay focused on their goals and tune out the noise are set up for long-term success.
“Don’t panic. Don’t chase returns or look for answers outside the asset classes you trust. And be sure to rebalance periodically, even when there’s turmoil.”
Source: FE Analytics
In third place is the £123m LF Seneca Diversified Income fund, which is run by Richard Parfect, Mark Wright, Tom Delic, Peter Elston and Gary Moglione. It scored a 2.4 average decile ranking in this research.
Seneca Investment Managers believes “there is a real need for good income-generating investments” and this fund aims to deliver a high and growing income with the potential to preserve the real value of invested capital.
The managers invest directly in UK equities (top three holdings are AJ Bell, Marston’s and Kier Group) but outsource investments in overseas stocks (CIM Dividend Income, Prusik Asian Equity Income, BlackRock World Mining Trust), fixed income (Royal London Short Duration Global High Yield Bond, Muzinich Short Duration High Yield, Royal London Sterling Extra Yield Bond) and specialist assets (International Public Partnerships, Doric Nimrod Air Two, Sequoia Economic Infrastructure).
Of the 26 IA Mixed Investment 20-60% Shares funds to score less than 4 in this research, Vanguard LifeStrategy 40% Equity is the largest at £3.4bn.
The £1.4bn Premier Multi-Asset Distribution fund, headed up by David Hambidge, Ian Rees, Simon Evan-Cook and David Thornton, is the second largest. This fund-of-funds has built up a strong track record on the back of its valuation-based process and firm belief in the merits of active management.
Other funds that have assets under management of more than £500m and are at the top of the peer group for many of the metrics we looked at include Artemis Monthly Distribution, M&G Episode Income, Premier Multi-Asset Monthly Income, Royal London Sustainable Diversified Trust and Fidelity Multi Asset Strategic.
Source: FE Analytics
At the very bottom of this research, however, is the £555.1m Quilter Investors Diversified Portfolio, which scored 9.3. The fund is in the peer group’s bottom quartile for its five-year loss of 0.53 per cent as well as its alpha, maximum drawdown, Sharpe ratio and downside capture.
One-quarter of the portfolio is allocated to the Quilter Investors Global Dynamic, which is bottom-decile in the IA Global sector over the five years in question.
Other large funds coming with average decile scores higher than seven include Halifax Cautious Managed (£2.4bn), Investec Cautious Managed (£1.8bn) and Janus Henderson Cautious Managed (£1.6bn).