MI Hawksmoor Vanbrugh, Premier Multi-Asset Monthly Income and F&C MM Navigator Moderate are among some of the multi-asset funds to have best-protected investors against capital loss over the last five years, research from FE Trustnet shows.
Given that funds across the IA Mixed Investment and Flexible Investment sectors have varying mandates and often don’t have a benchmark, we decided to get under the bonnet of the sectors and figure out which of them have been the least likely to lose money over the last five years.
To do so, we took all 760 funds across the four sectors with long-enough track records and, within the list as a whole, filtered through which vehicles were in the best 25 per cent over several risk metrics. The risk metrics we used were downside risk ratio (which predicts susceptibility to lose money during falling markets), maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) and maximum loss (which measures the longest-running consecutive loss without making a gain.
We also filtered through the funds in the top 25 per cent for their number of negative monthly periods over the last five years as well as their Sharpe ratios (which measures risk-adjusted returns) and annualised volatility.
We were then left with a list of 36 funds. In order to ‘double distill’ the data, we took the funds which fell into the top 50 per cent in terms of each risk metric above. We were left with just four funds, as shown in the table below:
Source: FE Analytics
First up for its lowest downside risk, maximum drawdown, number of negative periods and annualised volatility over the last five years is the five FE Crown-rated Hawksmoor Vanbrugh fund.
Headed up by Daniel Lockyer, FE Alpha Manager Richard Scott and Ben Conway, the £119m fund aims to provide both capital growth and income over the long term.
It is a fund-of-funds and currently has a portfolio of 47 holdings, 29.3 per cent of which are closed-ended. In terms of asset class, it currently has 28.2 per cent in equities, 16.7 per cent in corporate bonds, 11.2 per cent in property and 10.4 per cent in absolute return vehicles.
Its largest individual holding is Royal London Short Duration Global High Yield Bond followed by Jupiter Absolute Return, Old Mutual Global Equity Absolute Return and closed-end German property fund Phoenix Spree Deutschland.
The managers are renowned for their focus on capital preservation. Over five years, the fund has outperformed its average peer and FTSE UK Private Investor Income benchmark by 16.29 and 4.04 percentage points respectively with a total return of 54.27 per cent.
Over the same time frame, it has an annualised volatility of 4.85 per cent, a maximum drawdown of 4.33 per cent and a maximum loss of 3.54 per cent. It has lost money during 14 of the last 60 months.
What’s more, had an investor placed an initial £10,000 into the fund five years ago, they would have received £972.18 in income alone.
The fund with the second-lowest maximum drawdown and annualised volatility on the list is Premier Multi-Asset Monthly Income. It is in joint-third place with the three other funds on the list for its 16 negative monthly periods over five years.
The £676m fund is managed by David Hambidge, Ian Rees, David Thornton and Simon Evan-Cook. The team aims to provide a high level of income for investors as well as protecting capital on the downside. Had an investor placed an initial £10,000 into the fund five years ago, for instance, they would have received £2,608.14 in income alone.
Also a fund-of-funds, Premier Multi-Asset Monthly Income currently has a portfolio of 57 holdings. Of these, 28.5 per cent are UK equity funds such as largest holding Standard Life UK Equity High Income, 21 per cent are in corporate bonds funds such as TwentyFour Dynamic Bond and 18.6 per cent are in general bonds, which the fund is exposed to through the likes of M&G European Loans. It also has smaller weightings in international equities, property and alternative assets.
Over five years, the fund has returned 56.65 per cent compared to its average peer in the IA Mixed Investment 20%-60% Shares sector’s return of 37.98 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
Over this time frame, it has an annualised volatility of 4.97 per cent, a maximum drawdown of 4.39 per cent and a maximum loss of 3.32 per cent.
In bronze place with the same maximum loss, a slightly lower downside risk ratio but a higher drawdown and volatility is the four crown-rated Premier Multi-Asset Distribution fund. It is headed up by the same management team as Premier Multi-Asset Monthly Income and even resides in the same sector.
However, it pays a quarterly rather than a monthly dividend and aims to pay an annual income which rises over the long term as well as to deliver some capital growth. As such, it a slightly greater focus on capital appreciation than its peer and its largest holdings differ significantly.
Within its 31.1 per cent UK equity allocation, for instance, its largest holding is Rathbone Income, its largest holding within its 20.6 per cent corporate bond allocation is Hermes Multi Strategy Credit Fund Hedged and its largest individual allocation within its 16.6 per cent bond weighting is Fairoaks Dynamic Credit.
Over five years, the £1.3bn fund has returned 62.48 per cent and has done so with an annualised volatility of 5.35 per cent and a maximum drawdown of 4.52 per cent. Had an investor placed an initial £10,000 into the fund five years ago, they would have received £2,437.62 in income alone.
The fourth and final fund on the list is Gary Potter and Rob Burdett’s F&C MM Navigator Moderate, which also has four FE Crowns and resides in the IA Mixed Investments 20%-60% Shares sector.
The £431m fund-of-funds aims to provide income and capital growth through a diversified portfolio of holdings. Its largest individual constituents include Majedie UK Focus at 5.6 per cent, Majedie Asset Management Tortoise at 5.2 per cent and Invesco Perpetual Tactical Bond at 4.1 per cent.
In terms of asset class allocation, it currently has 27.9 per cent in fixed income, 18.4 per cent in UK equities, 16.7 per cent in specialist non-equity and 10.5 per cent in European equities. It also has smaller weightings to other regional equities as well as 8.3 per cent in futures in a bid to minimise volatility. Alongside this, the fund has an 11.8 per cent cash weighting.
Over five years, F&C MM Navigator Moderate has outperformed its average peer by 17.01 percentage points with a total return of 54.99 per cent. It has done so with an annualised volatility of 5.37 per cent, a maximum drawdown of 4.63 per cent and a maximum loss of 3.09 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
Had an investor placed £10,000 into the fund five years ago, they would have received £2,450.36 in income alone.