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Top-performing multi-asset funds that have minimised short-term losses

26 June 2017

FE Trustnet examines multi-asset funds in the top quartile of the IA Mixed and Flexible Investment sectors that have some of the lowest volatility and maximum drawdown figures.

By Jonathan Jones,

Reporter, FE Trustnet

The past five years have been characterised by low volatility and high returns, yet few multi-asset funds have managed to provide top quartile returns with low volatility and low maximum drawdowns.

Multi-asset funds have the luxury of investing in a wide range of investment vehicles. Higher fixed income exposure is likely to produce a lower return but reduce the overall volatility of the fund, while a higher allocation to equities can potentially produce higher returns, but will also increase the volatility of a fund.

Indeed, as the below shows, the MSCI AC World index has returned 91.99 per cent while the Barclays Global Aggregate index has returned 4.53 per cent over the past half-decade.

Performance of indices over 5yrs


Source: FE Analytics

However, the MSCI AC World has experienced volatility of 8.99 per cent and a maximum drawdown of 11.69 per cent – the most an investor could lose if buying and selling at the worst possible times – compared to the Barclays Global Aggregate index (4.62 per cent and 7.66 per cent respectively).

Having previously looked at the UK funds and global strategies that have limited short-term volatility for investors, below we consider the multi-asset space.

It should be noted that no funds in the IA Mixed Investment 0%-35% Shares sector, were able to meet the criteria, so we have chosen to focus on the other three sectors.

In the IA Flexible Investment sector, only two funds made top quartile returns while also sitting in the top quartile for volatility and maximum drawdown.

Unlike the others, this sector gives fund managers the flexibility to invest in a range of different assets with no minimum or maximum requirement for allocations.

FE Alpha Manager Peter WallsUnicorn Mastertrust has returned 116.84 per cent over the last five years – the fourth highest return in the sector out of 105 funds with a long enough track record.

It has experienced 7.37 per cent volatility with a maximum drawdown of 6.84 per cent – both top quartile figures – and has been the best fund for Sharpe ratio – a measure of risk-adjusted returns – with 1.8.

The £49m fund is different to many in the sector as it only invests in investment trusts, meaning it has an 89.4 per cent weighting to equities and none in fixed interest. It also currently has 10.6 per cent in cash.

It has a yield of 0.82 and a clean ongoing charges figure (OCF) of 0.88 per cent.

Performance of funds vs sector over 5yrs


Source: FE Analytics

The other fund is the £18.4m, four crown-rated CF Miton Worldwide Opportunities, run by Nick Greenwood, which has returned 83.31 per cent over the period.

As a fund of funds offering, it invests in both investment companies and unit trusts. However, it has just 0.3 per cent invested in fixed income and 13.8 per cent in cash, meaning it has 85.9 per cent allocation to equities. It has a yield of 0.19 per cent and an OCF of 1.05 per cent.

In the most equity-heavy IA Mixed Investment 40%-85% Shares sector, five funds have outperformed with low volatility.

Table of funds


Source: FE Analytics

The top performing fund is the five crown-rated Premier Multi-Asset Growth & Income run by David Hambidge, Ian Rees, Simon Evan-Cook and David Thornton.

The £558m fund has returned 95.11 per cent over the last five years – the second best return in the sector – while experiencing volatility of 6.61 per cent and a maximum drawdown of 6.52 per cent.

The fund, which aims to provide capital growth and income, is another fund of funds vehicle and has a 70.5 per cent exposure to equities, with the remainder of the portfolio split between fixed income, property, alternatives and cash.

It has the highest Sharpe ratio in the sector of 1.63. The fund has an OCF of 1.71 per cent and a yield of 2.19 per cent.

The least volatile strategy from the five-strong group is the £206.3m Old Mutual Managed fund overseen by Anthony Gillham and Lee Freeman-Shor.

The fund has returned 72.12 per cent over the period with volatility of 6.11 per cent – the fourth lowest in the sector – and a maximum drawdown of 6.4 per cent.

The fettered fund of funds, which invests in other Old Mutual vehicles, has a yield of 1.68 per cent and an OCF of 0.99 per cent.

The other funds to achieve high returns with low volatility and maximum drawdowns are COURTIERS Total Return Balanced Risk, Marlborough Extra Income and MI Hawksmoor Distribution.

The final sector is the medium-equity IA Mixed Investment 20%-60% Shares sector where four funds have achieved high returns with low volatility.

As you would expect, the returns of the funds and below the previous sectors though the volatility and maximum drawdown figures are also generally lower.

Table of funds


Source: FE Analytics

The fund with the lowest maximum drawdown (3.83 per cent) in the sector is the SF Cautious fund, run by Andy Parsons and Sheridan Admans.

The £26.7m fund aims to provide a combination of 4 per cent income and growth in excess of the sector.

It has returned 54.72 per cent over the last five years, 11.47 percentage points above the sector, with volatility of 5.16 per cent and a maximum drawdown of 3.83 per cent.

The fund of funds is mostly weighted to the UK (40.04 per cent) and North America (17.74 per cent), with 10.18 per cent held in money market vehicles.

Its largest holdings are CF Woodford Equity Income and CF Miton UK Multi Cap Income which make up a combined 20.73 per cent of the portfolio. The fund has an OCF of 1.99 per cent.

Another fund of note is the £427.6m F&C MM Navigator Moderate fund run by Gary Potter and Robert Burdett.

This fund of funds offering has 27.8 per cent of its portfolio invested in fixed income strategies with 14.7 per cent in ‘specialist non-equity’ and 12.6 per cent in cash.

On the equity side, the fund is further split into a 20.4 per cent exposure in the UK, 10.5 per cent in Europe and 6.2 per cent in North America.

Its largest holdings include Majedie UK Focus, Majedie Tortoise fund and Invesco Perpetual Tactical Bond fund. The fund has a yield of 1.7 per cent and an OCF of 1.65 per cent.

The two other funds to achieve the feat of top quartile returns with low volatility and maximum drawdowns are MI Hawksmoor Vanbrugh and Premier Multi-Asset Monthly Income.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.