Continued outflows from bond funds, research looking into the relatively poor performance of active UK managers and new funds from the likes of Schroders and Legg Mason are some of the stories that have broken this week.
There’s always a lot to keep track of in the fund management world so we’ve pulled together some of this week’s stories in the below roundup.
Bond funds hit with £890m outflow in Q3
Investors pulled a total of £890m out of bond funds over the third quarter of 2015, the latest Investment Association figures show, as sentiment towards the asset class weakened.
Across the association’s seven fixed-income sectors, a total of £42m was withdrawn in July, £333m came out in August and £515m was pulled in September. The IA Sterling Strategic Bond sector was the worst hit after seeing net retail outflows of £467m.
The IA Gilts sector was the only bond peer group to benefit from net retail inflows in each month of the third quarter, taking £177m over the period as investor sought safe havens from turbulent equity markets.
But equites remained the preferred area for retail investors during September, taking a net £568m in inflows over the month. Some £445m went into the IA UK Equity Income sector, which was the month’s best seller.
Guy Sears, interim chief executive at the Investment Association, said: “Net retail sales went back above the £1bn mark in September with investors directing the majority of their money into equity funds – UK equity in particular.”
“Property and mixed assets still seems to be favoured if we look at the top five best-selling sectors. However fixed income continues to suffer the highest withdrawals we have seen for this asset class for some time.”
UK active funds struggle against benchmark over long term, says S&P
Most active UK equity funds fail to beat the index over long periods of time, according to research by S&P Dow Jones Indices, although short-term performance has been more encouraging.
The latest S&P Indices Versus Active Funds (SPIVA) Scorecard report shows that 52 per cent of active UK equity funds lag the S&P UK BMI index over five years while 73 per cent are behind over 10 years.
Performance of sector vs index over 5yrs
Source: FE Analytics
On a one-year view, 82 per cent of portfolios managed to beat the index.
The research also shows that UK small-cap funds have been worse at beating the benchmark than those hunting higher up the market-cap spectrum, with the majority being behind the index over one, three, five and 10 years.
“With respect to sterling-denominated categories, certain categories of actively managed funds invested in UK equities delivered good performance and the majority of UK large and mid-cap funds posted higher returns than their respective benchmarks across one and three-year periods,” the SPIVA report said.
“This is in stark contrast with UK small-cap funds, which delivered lower returns than their corresponding benchmarks over the same time periods. However, all categories of UK funds trailed their corresponding benchmarks, when viewed over a 10-year time horizon.”
“In addition to this, sterling-denominated funds invested in emerging market, US and international equities also underperformed their corresponding benchmarks.”
Schroders launches global recovery fund for Kirrage and Murphy
Schroders has launched an onshore version of the Schroder ISF Global Recovery fund after strong demand from UK investors.
The Schroder Global Recovery fund, which opened to investors on 30 October, will be managed by Nick Kirrage, Kevin Murphy and Andrew Lyddon. Kirrage and Murphy are both FE Alpha Managers.
Performance of fund since launch
Source: FE Analytics
Robin Stoakley, managing director of UK intermediary at Schroders said: “The launch of the Schroder Global Recovery fund offers greater access to UK investors for this much sought after product.”
“It will look to match the strong long-term investment performance of the Schroder Recovery fund and the investment philosophy of Schroder ISF Global Recovery.”
“We believe there are very few funds that invest in this way making this a unique offering in the UK retail market. Nick, Kevin and Andrew have extensive experience investing in overseas stocks and we are confident that they will continue to deliver strong returns for clients.”
Aberdeen global head of distribution departs
Aberdeen Asset Management's John Brett has stepped down as global head of distribution after four years in the role to pursue a new career path.
Brett was handed the role in November 2011, having previously worked at Scottish Widows Investment Partnership (SWIP) first as legal, risk and compliance director and then as sales and marketing director.
At Aberdeen, he was instrumental in the integration process of SWIP after it was taken over by the former company in 2014.
Brett is currently a group management board member but will be appointed as a non-executive director of Aberdeen Asset Management Life and Pensions. He will stay with the end of 2015 to help with the transition process.
Martin Gilbert, chief executive of Aberdeen, said: “John has done a fantastic job for us, particularly in integrating the acquisition of SWIP. I am delighted that he will continue to work with us, initially as a non-executive director on the Life and Pensions board.”
“I am sure that, given time, other opportunities will develop where John can potentially play a significant role. In the meantime, the board wishes John and his family well.”
Legg Mason unveils global total return bond fund
Legg Mason Global Asset Management subsidiary Western Asset is to launch a global total return bond fund that will focus on relative value opportunities across global investment grade debt markets and currencies.
The Dublin-domiciled Legg Mason Western Asset Global Total Return Investment Grade Bond fund will be managed by Gordon Brown, co-head of global portfolios at Western Asset, with support from portfolio manager Andrew Cormack.
The fund will invest with an opportunistic approach and without the constraint of a benchmark, making use of a combination of top-down global macro strategies and tactical sector allocation, as well as bottom-up security selection.
It targets a positive return over the long-term regardless of conditions in the wider bond market and has a focus on capital preservation, leading to its remit to invest solely in investment grade as this area tends to have lower default rates than high yield.
Brown said: “Fixed income markets are at a very interesting juncture, with the potential for rate rises in the US countered by concerns over global growth, particularly in China.”
“As such, financial markets should continue to be volatile, and therefore a flexible strategy that can exploit opportunities as they emerge could be an attractive addition to investors attempting to manage their fixed income exposure.”
