Square Mile Investment Consulting & Research has added the Henderson Core Multi Asset range of funds, Neptune Global Alpha and Evenlode Income to its Academy of Funds.
The three additions cover a wide range of investments, with some being deemed ideal core holdings while the more volatile nature of others means they might be best used alongside other funds.
In the below article, FE Trustnet puts the three funds under the spotlight to see what earned them their place in the Academy.
Henderson Core Multi Asset
This range of funds comprises Henderson Core 3 Income, 4 Income and 5 Income and Henderson Core 6 Income & Growth. Square Mile has awarded them its ‘Recommended’ rating and says the range is a “compelling proposition” for investors seeking an income-focused risk-targeted approach.
Alex Farlow, head of risk-based solutions at the investment research firm, says the funds are managed by a strong and experienced team, which is led by Henderson’s co-heads of multi-asset Bill McQuaker (pictured) and Paul O'Connor.
“The income focus of the funds means the team spend a lot of time on forecasting income, attempting to ensure the income they deliver is relatively consistent and at a stable level for investors,” Farlow added.
“The team generate their own strategic asset allocations in order that the funds are structured over the longer term to meet the risk target and generate a sustainable income, and we see this as a positive in terms of their awareness of potential portfolio risks.”
The Henderson Core range resides in the IA Unclassified sector and has no specified benchmark, making comparisons difficult. The graph below shows that since May 2015, when the final offerings in the range were launched, the lowest risk solution has returned 5.81 per cent while the highest risk fund gained 12 per cent.
Performance of funds since launch
Source: FE Analytics
As a point of comparison, the funds have underperformed the FTSE All Share and government bonds, as represented by the FTSE Actuaries UK Conventional Gilt Over 10 Years index, over this time frame although they do not aim to beat these indices.
However, FE Analytics also shows that the four funds have a significantly lower annualised volatility and maximum drawdown than both UK equities and government bonds.
Henderson Core funds have ongoing charges figures (OCFs) ranging from 0.81 per cent to 0.83 per cent and currently yield between 3.20 per cent and 4.20 per cent.
Neptune Global Alpha
Square Mile argues that Neptune Global Alpha, which is managed by Neptune chief executive Robin Geffen, is “one of the purest expressions” of the asset management house’s macroeconomic views, global sector-based investment process and company analysis.
The £94.1m fund, which the consultancy has given an ‘A’ rating, is in the IA Flexible Investment sector and has no constraints on where it can invest. Geffen builds a portfolio of global equities, with a bias to medium and smaller sized companies.
Neptune Global Alpha has just under 55 per cent of its portfolio in North American equities, with another 35 per cent in Japan and 7.8 per cent in emerging markets. Top holdings include ISIS Pharmaceuticals, Google and sports clothing firm Under Armour.
Andrew Johnston, research analyst at Square Mile, said: “Mr Geffen is not afraid to aggressively reposition the portfolio should the team's investment outlook change. It will therefore tend to look and behave very differently to any global equity index and as such could act as a complement to more index aware investment strategies.”
Performance of fund vs sector since launch
Source: FE Analytics
“However, it is not a strategy for the fainthearted and a long-term time horizon is definitely required. Ultimately, this fund greatly benefits from having an experienced manager at the helm, insightful macroeconomic as well as global sector views, and an impressive array of supporting analysts and fund managers.”
The fund is currently first decile over one, three, five and 10-year periods, as well as over one, three and six months. However, a look at calendar year performance backs up Johnston’s “fainthearted” comment: it has been top decile in seven of last 10 years but dropped into the bottom decile in the remaining three, with a particularly hard fall in 2008.
Neptune Global Alpha has a 0.93 per cent clean OCF.
Evenlode Income
Hugh Yarrow and Ben Peters' £276m Evenlode Income fund has been given an ‘A’ rating thanks to the fact that the managers have “a sensible investment philosophy and a very clear idea for the types of investments they seek”.
John Monaghan, senior investment research analyst, said: "Since launch the fund has delivered a consistent set of returns whilst steadily growing its dividend distributions. Through its objective of seeking to produce steady, incremental returns per annum over the long term, and to increase dividend distributions in line with inflation, this fund meets our income and capital accumulation outcomes.”
“We believe this fund provides investors with a differentiated UK equity income proposition and one that could be seen as a core holding within a diversified portfolio.”
FE Analytics shows the fund has posted a total return of 107.58 per cent since inception in October 2009. It’s currently first quartile in the IA UK Equity Income sector over one, three and five years, with less volatility, a lower maximum drawdown and a higher Sharpe ratio than its average peer.
Performance of fund vs sector since launch
Source: FE Analytics
Meanwhile, an investment of £10,000 at launch would have resulted in income payouts totalling just over £2,700. The fund has met its objective of growing its dividend in each year since payouts started and paid out a total of 6.27p in its most recent year, an increase of around 12 per cent on the previous year.
Top holdings include Unilever, Diageo, GlaxoSmithKline, AstraZeneca and Pearson, while 72 per cent of the portfolio is in large caps, 25 per cent is in mid-caps and the remainder is in cash.
Wise Investments’ Evenlode Income has a clean OCF of 0.99 per cent and yields 3.61 per cent.
