CF Lindsell Train UK Equity, Schroder UK Opportunities and Barclays GlobalAccess UK Opportunities have been able to deliver across up and down markets over 10 years, data from FE Analytics suggests.
With investors and analysts increasingly split over the future direction of the UK market, FE Trustnet has looked for UK equity funds that have a decent track record in weathering both up and down markets.
To find out which funds have been able to navigate up and down market conditions, FE Trustnet considered a number of risk metrics spanning 10 years, capturing the global financial crisis and the ensuing equity bull market.
All the funds were measured against the FTSE All Share index, the most common benchmark in the IA UK All Companies sector.
Four metrics were considered: the bull/bear ratio (which judges funds’ ability to ride upswings in the market and demonstrate lower risk in down markets), the downside capture ratio (which shows the fund’s performance in a down market), downside risk (an estimate of a fund’s potential loss in negative market conditions), and upside capture ratio (which shows the fund’s performance in an up market).
Looking across the 264-strong sector, just three funds emerged with top quartile results across the four different metrics: Barclays GlobalAccess UK Opportunities, CF Lindsell Train UK Equity and Schroder UK Opportunities.
Source: FE Analytics
All three funds have also comfortably outperformed the sector average and the FTSE All Share index over 10 years.
Below FE Trustnet considers the funds in more detail.
CF Lindsell Train UK Equity
First on our list is £4.5bn, five FE Crown-rated CF Lindsell Train UK Equity fund. The fund, run by FE Alpha Manager Nick Train, has the greatest bear/bull ratio figure of the three funds at 1.15.
According to FE Analytics, a ratio greater than 1.0 means that the fund has a better ability to ride upswings in the market with less risk in the down markets, as represented by the benchmark.
It also had the lowest downside capture ratio of the three funds, capturing just 82.84 per cent of the benchmark’s negative performance in a down market.
The fund was first launched in 2006 and has become a firm favourite of advisers and investors.
It sits on the FE Invest Approved List and is also recommended in portfolios by the FE Adviser Fund Index (FE AFI) panel of leading financial advisers.
FE Research analysts note Train’s high-conviction, low turnover approach to management and stock picking skills.
“We like the consistency of his strategy, which will not vary depending on the economic conditions,” they said. “His very selective approach allows him to run a highly concentrated portfolio, which should boost the fund’s returns if his stock picking is successful.”
The fund has also been the best performer over 10 years, delivering a total return of 237.91 per cent compared with a rise of 81.96 per cent for the average IA UK All Companies member and a 78.84 per cent increase for the FTSE All Share index
Performance of fund vs sector & benchmark over 10yrs
Source: FE Analytics
CF Lindsell Train UK Equity has an ongoing charges figure (OCF) of 0.72 per cent.
It is also worth noting that the Aviva Investors UK Equity MoM 1 fund also made the final list, however this fund is also managed by Lindsell Train.
Barclays GlobalAccess UK Opportunities
Next on our list is the four crown-rated, £3747.3m Barclays GlobalAccess UK Opportunities fund – a multi-manager fund. Of the three, the Barclays fund had the lowest downside risk ratio of 12.39.
Launched in 2004, the fund invests in emerging and undiscovered fund managers – an area of the market it believes can deliver the best returns.
Currently the portfolio consists of three managers: Heronbridge Investment Management, JO Hambro Capital Management and Lindsell Train.
Boutique manager Heronbridge has the fund’s largest target allocation, representing 35 per cent of the fund. Lindsell Train meanwhile has a target allocation of 30 per cent. Both were added to the fund in 2010.
JO Hambro Capital Management is the most recent addition to the portfolio in 2014, representing a target allocation of 30 per cent.
The Barclays fund has a diversified portfolio of 101 holdings. The largest sector weight in the portfolio is industrials followed by consumer cyclical stocks. Significant underweights include energy, healthcare, basic materials and financial services.
Its largest holding is Daily Mail & General Trust, which represents 3.3 per cent of the portfolio. Other significant holdings include drinks firm Diageo, miner Rio Tinto, information provide RELX Group and financial service firm Hargreaves Lansdown.
Over 10 years Barclays GlobalAccess UK Opportunities has risen by 178.25 per cent. It has an OCF of 0.97 per cent, the highest of the three funds.
Schroder UK Opportunities
Last on our list is the £273.9m Schroder UK Opportunities fund, launched in 1989. The fund had the greatest upside capture ratio of the three funds. With a ratio of 113.36 per cent it outperformed the benchmark by 13.36 per cent in up markets.
However, it had the highest downside capture ratio of the three funds, capturing 91.74 per cent of the benchmark’s negative performance in a down market. It also had the highest downside risk of 15.51.
The fund has been managed by Matt Hudson since September 2014; he was joined by Michael Zorko in July 2017.
The fund invests in a concentrated portfolio of large- and medium-sized UK companies, with an investment approach based around taking advantage of turning points in the business cycle.
Over 10 years, the fund has returned 166.09 per cent compared with a rise of 81.96 per cent for the average IA UK All Companies sector and a 78.84 per cent increase for the FTSE All Share index.
Performance of fund vs sector & benchmark
Source: FE Analytics
Among the funds top holdings are oil giant Royal Dutch Shell, pharma stock GlaxoSmithKline, insurer Prudential, Lloyds Banking Group and miner Rio Tinto.
Schroder UK Opportunities has an OCF of 0.92 per cent.