Adviser interest in funds such as JPM Global Macro Opportunities, Artemis Monthly Distribution and Evenlode Income has surged in 2016, data from FE Analytics shows, although the year’s turbulent conditions mean more attention has been paid to cash funds.
2016 has been a relatively challenging one for investors to navigate, given that it started with concerns over slowing Chinese growth and low commodity prices, had the U K vote to leave the EU halfway through and recently saw Donald Trump elected as US president.
That said, financial markets have made good progress over the year to date. FE Analytics shows the FTSE All Share is up 11.01 per cent while developed market equites are ahead 24 per cent and emerging markets have made 30 per cent. Gilts are up 8.70 per cent.
Performance of indices over 2016
Source: FE Analytics
But over this challenging time, which funds have professional investors been paying more attention to?
The FE Analytics Market Intel tool allows us to see which funds have been researched the most frequently by the professional investors using FE Analytics. We looked at the 250 most popular Investment Association funds over 2016 to date, then compared it with the rankings for 2015 to find out which funds had the biggest jump in interest.
The most popular fund over 2016 has been the Standard Life Investments Global Absolute Return Strategies fund – commonly known as ‘GARS’ – which was also the most-researched fund throughout 2015. This is not too much of a surprise, given the fund’s £26.3bn size and the fact it is a mainstay of many professional portfolios.
However, our data shows that it is a relative newcomer and rival of GARS that has been the biggest jump up the adviser research rankings this year: JPM Global Macro Opportunities.
Managed by James Elliot, Shrenick Shah and Talib Sheikh, JPM Global Macro Opportunities launched in February 2013 but has already gathered assets of £791.5m. It won the top FE Crown rating of five as soon as it hit its three-year anniversary and has made a 27 per cent total return since launch, compared with just under 10 per cent from its average IA Targeted Absolute Return peer.
The fund, which has jumped from being ranked 801 for adviser research in 2015 to 93 this year, aims to make a positive annual return of 7 per cent over the medium term, through a multi-asset portfolio built around a number of set themes. Current themes include Europe gradual growth recovery, low inflation and Japan beyond Abenomics.
Although JPM Global Macro Opportunities tends to be riskier than the average absolute return fund, it still a fund for the relatively cautious investor. The below table shows the 25 funds that have made the biggest jump in the adviser research rankings (excluding money market products) and many do have a defensive tilt.
Source: FE Market Intel Tool
James Foster and Jacob de Tusch-Lec’s Artemis Monthly Distribution, which appears in second place after moving from 525th to 150th place, is another relative defensive option as it has around half of its portfolio in fixed income, although it must be noted that the bulk of its allocation is to high yield bonds.
Artemis Monthly Distribution is in the IA Mixed Investment 20%-60% Shares sector’s fourth quartile for annualised volatility since launch, standing at 6.52 per cent – although this is still lower than the volatility of the MSCI AC World index. However, its maximum drawdown is one of the sector’s lowest at 5.13 per cent.
When it comes to total return, the fund has been the peer group’s best performer since launch after making 78.48 per cent. Over this time its average peer has made just 34.36 per cent while its benchmark (a 60/40 composite of the IBOXX UK Sterling Non-Gilts All Maturities and MSCI AC World indices) is up 52.86 per cent.
Performance of fund vs sector and index since launch
Source: FE Analytics
Hugh Yarrow and Ben Peters’ Evenlode Income is another that has seen a swell in interest from professional investors after its research ranking went from 515 last year to 164 in 2016. The fund has outperformed the average IA UK All Companies (where it now resides) and IA UK Equity Income (where it used to reside) sectors by a margin of about 60 percentage points since launch in October 2009 after returning 141.01 per cent.
With about two-thirds of its £1.1bn portfolio in large caps, the fund is one of the least volatile in its sector (9.78 per cent annualised volatility) and has the sixth lowest maximum drawdown at 8.63 per cent. This might explain why the equity fund has proven popular at a time when advisers have been looking for more cautious vehicles.
Other funds that have witnessed the largest increase in professional investor research and have a more defensive nature include Aviva Investors Multi Strategy Target Income, Vanguard LifeStrategy 20% Equity and Jupiter Absolute Return.
There are exceptions, however, and Legg Mason IF Japan Equity is a good example. This £557.1m fund is one of the most volatile in the entire Investment Association universe (24.66 per cent annualised, over 10 years); that said, it has also been an incredibly strong performer in recent years, which will have attracted attention.
The research ranking table on the second page stripped out money market funds but if they are included in the results then the interest in cautious portfolios becomes even more apparent.
Some 19 of the top 50 funds seeing the largest increase in their research ranking are cash funds in the unfiltered list.
Source: FE Analytics
Furthermore, cash funds witnessed the fourth, six, seventh, eighth and 10th biggest increase in adviser research from 2015’s figures with offerings such as Elite Income Plan Cash, Smith & Williamson Cash, L&G (N) Cash Pension, Fidelity Gross Accumulating Cash and Federated Sterling Cash Plus jumping up the rankings.