The performance of the four mixed-asset sectors appears to be in inverse proportion to their maximum equity limit: IMA Mixed Investment 0-35% Shares has the best record over five years, with returns of 9.86 per cent, while IMA Flexible Investment funds – which can hold up to 100 per cent in equities – came in last, with losses of 3.03 per cent.
Performance of sectors over 5-yrs
Source: FE Analytics
A higher exposure to fixed interest has boosted performance, especially to investment grade corporate bonds and gilts, with the latter being one of the best-performing asset classes over five years.
The average fund in the UK Gilt sector is up 50.34 per cent over this period, while the average Sterling Corporate Bond fund is up 24.06 per cent.While global equity markets rallied in 2009 and 2010 following the onset of quantitative easing, in general funds that managed to protect against the downside in 2008 and 2011 did better than those that outperformed during the up period.
Of the 10 best performers across the sectors over five years – including the five crown-rated CF Ruffer Total Return and Trojan portfolios – seven were top-10 performers in 2008 and all but Ruffer European were top-decile performers in 2011.
Year-on-year returns of top-performing mixed-asset funds
| 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) | |
| CF Ruffer Total Return | 0.91 | 13.6 | 10.74 | 20.88 | 5.62 |
| Trojan | 8.52 | 14.39 | 11.68 | 1.11 | 6.08 |
| CF Miton Special Situations | 1.79 | 8.29 | 4.99 | 7.26 | 11.17 |
| FTSE All Share | -3.46 | 14.51 | 30.12 | -29.93 | 5.32 |
Source: FE Analytics
The majority are defensively focused and underweight equities. Take FE Alpha Manager Martin Gray's CF Miton Special Situations fund, for example, which sits in the IMA Flexible Investment sector and can hold up to 100 per cent in equities.
According to FE data, it is only 35 per cent invested in equities.
Despite the superior performance of funds with a higher proportion of their assets in bonds rather than equities, a number of portfolios across the mixed investment sectors are in breach of their equity limit.
According to FE Analytics, nine funds in the IMA Mixed Investment 20-60% Shares sector have more than 60 per cent in equities.
Back in February 2011, FE Trustnet revealed that Mike Jennings’ Premier Global Strategic Assets fund was in breach of its 85 per cent limit. Since then – and following significant underperformance in 2011 – it has moved from IMA Mixed Investment 40-85% Shares to IMA Global.
It is important, however, to remember that past performance is not an indication of future performance.
Simon Edelsten, manager of the Artemis Global Select fund, believes that investors who are chasing the bond returns seen in the last five years have flooded the markets and created a bubble.
"The bond blow-out of 1994/1995 was totally unexpected. When these things happen they happen very quickly," he warned.