The system draws on four FE ratings to ensure that the list is strong on all fronts. These are: FE Crown Fund Ratings, which highlight excellent funds; the FE Alpha Manager rating, which highlights excellent managers; FE’s new Group Awards, which identify fund houses with a specific edge in a given asset class; and finally the FE AFI panel, which considers the views and opinions of leading industry experts.
The list was rebalanced for the first time earlier this month, which saw a number of high-profile names drop off the list.
Here are five new entrants that may not yet have made it on to the radar of retail investors:
Newton Managed Income
Newton Managed Income is headed up by new FE Alpha Manager Tim Wilson, who has run the fund since its launch in April 2008.
It sits in the IMA Mixed Investment 20%-60% Shares sector. Equities currently make up around 55 per cent of assets, with the rest split between bonds and cash.
Wilson targets both income and growth by investing in other investment funds. It is a fettered portfolio, meaning that it invests almost exclusively in other funds run by Newton.
This method hampers the manager’s flexibility, but allows him to keep costs to a minimum.
Performance of fund vs sector since launch
Source: FE Analytics
Newton Managed Income has a very strong record since launch, with returns of 50.76 per cent.
This is around twice as much as the IMA Mixed Investment 20%-60% Shares sector average, which is also the fund’s benchmark.
Wilson’s portfolio has been slightly more volatile, however.
It is also one of the highest-yielding funds in its sector, currently paying out 4.35 per cent.
The FE Research team say they like Wilson’s simple approach, and point out that it is a particularly good option for income-hungry investors.
"Wilson analyses macroeconomic data, visits companies and meets numerous people involved in all sorts of day-to-day activities within these firms to build a picture of the ‘real’ economy and determine whether the environment is more equity- or bond-friendly," they said.
"He then works out which Newton funds to invest in and how much to allocate to each one, keeping in mind the primary objective of providing income to investors."
"Wilson is relatively unconcerned if capital appreciation is not fantastic, because income is what really matters; however, the fund has delivered superior capital growth as well."
"Being Newton’s strategist gives Wilson the advantage of choosing funds that already follow the desired strategy," they added.
The fund is still relatively low profile, with just £88m assets under management – much less than Newton’s £7.4bn Real Return fund, which is headed up by FE Alpha Manager Iain Stewart.
Managed Income requires a minimum investment of £1,000 and has an ongoing charges figure of 1.4 per cent, which is very low for a fund of funds. It has five FE Crowns – the maximum number.
Baillie Gifford Japanese Smaller Companies
FE Alpha Manager John MacDougall’s £62.5m fund is the only constituent of the FE Select 100 that sits in IMA Japanese Smaller Companies.
It has beaten its sector average, which is also its benchmark, over one, three, five and 10 years, and has been top quartile over the first two of these periods.
The fund has also been consistently less volatile, which has helped to push up its Sharpe ratio.
Performance of fund vs sector over 10yrs
| Name | 1yr returns (%) |
3yr returns (%) | 5yr returns (%) | 10yr returns (%) |
|---|---|---|---|---|
| Baillie Gifford Japanese Smaller Companies | 33.12 | 47.53 | 75.64 | 131.42 |
| IMA Japanese Smaller Companies | 24.37 | 31.83 | 70.31 | 119.65 |
Source: FE Analytics
MacDougall has a universe of only 250 stocks, which allows him to meet with company management regularly. He holds around 50 stocks at any given one time.
"The manager operates in a niche market but has successfully generated outperformance over the long-term by investing in a small number of carefully chosen stocks," the team said.
"Managing the Baillie Gifford Japanese Smaller Companies fund from Edinburgh means the manager is not distracted by short-term market movements and allows him to concentrate on his stock analysis."
Baillie Gifford Japanese Smaller Companies requires a minimum investment of £1,000 and has an OCF of 1.58 per cent.
MacDougall has run the fund since May 2005.
Ecclesiastical Amity International
Ethically focused funds are not everyone’s cup of tea, but the FE Research team think Ecclesiastical Amity International is a good global fund in its own right.
The £215m vehicle has been headed up by FE Alpha Manager Robin Hepworth for more than a decade.
Hepworth targets capital growth and income by investing in companies across the globe, but will not hold those that negatively impact society and the environment. This means sectors such as tobacco, alcohol, weapons production and gambling.
While this approach undoubtedly limits Hepworth’s flexibility, Rob Gleeson’s team say it complements the fund’s already defensive mindset.
"Hepworth applies the same successful investment approach he uses with Ecclesiastical Higher Income to international equities; that is to say he looks for companies with strong balance sheets that can grow gradually over the long-term," they said.
"The sole difference is the use of socially responsible screening, which prevents him from investing in companies that adversely affect society and the environment."
"The use of both methods together results in a defensive position that has proved to be effective at generating consistent returns and protecting capital."
"It also offers an original approach to investing in global equities as the manager does not rely on growth stocks."
The fund is currently yielding 1.28 per cent.
Ecclesiastical Amity International is a top-quartile performer in its IMA Global sector over five and 10 years, and second quartile over one and three.
It has beaten its FTSE World benchmark over one, five and 10 years, but has fallen slightly short over three.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund has been particularly dominant in the long-term, with returns exceeding 236.42 per cent over 10 years.
Ecclesiastical Amity International has an OCF of 1.58 per cent and requires a minimum investment of £200.
In an article last week, FE Trustnet highlighted five of the funds that have dropped out of the FE Select 100.