Last week, FE published its semi-annual re-balancing of its rating system, which awards funds one to five crowns according to alpha generation, volatility and the consistency with which they have beaten their benchmark.
First State funds averaged a 4.4 crown-rating, the highest of any group with at least 10 funds under management. Invesco Perpetual, Artemis, Baillie Gifford and Cazenove also scored highly.
Source: FE Analytics
The study only took into account the groups that run at least 10 funds eligible for the rating, which meant that boutiques such as Somerset (which runs three funds, with an average rating of 4.66) and Unicorn (which has five funds, with an average of 4.6) were deliberately left off the list.
First State, which specialises in emerging markets, came out on top, helped by the fact that 11 of its 15 funds have the coveted five crown-rating. These include its popular Global Emerging Markets and Greater China Growth funds, as well as lesser-known names such as its Global Agribusiness and Global Listed Infrastructure funds.
The group also has a very high concentration of FE Alpha Managers. Out of the 19 managers running First State funds, six of them (Martin Lau, David Gait, Angus Tulloch, Alistair Thompson and Millar Mathieson) hold this title.
First State’s best-performing fund over three years, both in terms of absolute returns and returns relative to its peers, has been its Asia Pacific Sustainability portfolio.
According to FE Analytics, the £272m fund – which is co-managed by David Gait and Sashi Reddy – is the best performer in the IMA Asia Pacific ex Japan sector over this time, with returns of 19.58 per cent.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
Invesco Perpetual dominated the headlines last year following the announcement that its star manager Neil Woodford, who runs around £30bn of assets, will leave in May to set up his own company.
However, our research shows that Invesco Perpetual is not a one-man team, as the group came out second in the study – its funds have an average crown-rating of 3.7.
Out of its 39 funds, 14 have the maximum rating of five crowns while only four have one crown.
Invesco Perpetual has been the best-performing fund group of the last decade, according to an FE Trustnet study published last year.
Not taking survivorship bias into account, 85.7 per cent of its portfolios with a 10-year track record have beaten their sector and or benchmark over this time.
Given the selection available, it is not surprising to see that the group's fettered funds – Invesco Perpetual Managed Growth and Invesco Perpetual Managed Income – are both top-quartile performers in their respective sectors over one, three, five and 10 years.
Performance of funds vs sectors over 10yrs
Source: FE Analytics
Artemis has 11 funds with a three-year track record, therefore only narrowly meeting the criteria.
Nevertheless, its average fund rating is 3.6, putting it third on the list.
Only two of its funds have a five crown-rating. One of these is Artemis Global Income, run by Jacob de Tusch-Lec, which achieved the maximum rating last week at the first time of asking.
Although Artemis Income, run by the highly regarded FE Alpha Manager duo of Adrian Frost and Adrian Gosden, is the group’s flagship portfolio, it only has a four crown-rating.
Baillie Gifford, although not one of the most marketed fund groups, has the fourth highest average crown-rating at 3.4. Also, as shown by last year’s study, it is the best-performing fund provider over three, five and 10 years.
One of its top performers is the five crown-rated Baillie Gifford Japanese portfolio, co-managed by Sarah Whitley and Matthew Brett.
According to FE Analytics, the £437m fund has delivered at least the third-highest returns in the IMA Japan sector – and has comfortably beaten its TOPIX benchmark – over one, three, five and 10 years.
Source: FE Analytics
It is also top quartile for alpha generation, information ratio, Sharpe ratio, downside risk and annualised volatility over the last decade.
The final group on the list is Cazenove, which has 26 funds with an average crown-rating of 3.4.
The group boasts three FE Alpha Managers in Julie Dean, Paul Marriage and Steve Cordell, as well as other high-profile names such as Marcus Brookes and Robin McDonald.
Of course, Cazenove’s inclusion on its own could be seen as contentious given the fact that the group was acquired by Schroders in early 2013.
However, if the Cazenove and Schroders portfolios eligible for a crown rating – 79 funds – were to be combined, the average fund would still have a rating of 2.97, putting the new group in 11th place.
Threadneedle did not make the list, but it is still worthy of a mention.
The results show the study favoured groups that run a smaller number of funds. However, Threadneedle has 73 funds with a three-year track record, yet it still came 10th on the list.
The group runs more portfolios than its traditional competitors such as Schroders, Fidelity, Henderson and M&G, but its fund still have an average crown rating of three. More than 12 per cent of these funds have the maximum five crown-rating while less than 7 per cent have just the one crown.
Jupiter also scored well, with an average crown rating of 3.1 for its 35 funds with a three-year track record.
One of the study's real surprise packages, however, was Royal Bank of Scotland Collective Investments. It only runs 12 funds, but its average crown rating is 3.4. Some of its highest-rated funds include Royal Bank of Scotland UK Equity Income and Royal Bank Scotland High Yield.
