Recent years have been relatively difficult ones for investors in UK equities after the country’s vote to leave the EU and political uncertainty dented sentiment, although the IA UK All Companies sector is still home to funds that have managed to perform strongly.
Data from FE Analytics shows that the FTSE All Share made a total return of 62.98 per cent over the five years to the end of 2017, lagging the 81.46 per cent made by the MSCI AC World index.
The average member of the IA UK All Companies sector beat the FTSE All Share with 68.27 per cent gain, but still lags behind global equities.
In this article, we review the performance of the funds within the IA UK All Companies peer group, reviewing their relative performance across 10 metrics: cumulative five-year returns to the end of 2017 as well as the annual returns of 2017, 2016 and 2015, annualised volatility, alpha generation, Sharpe ratio, maximum drawdown and upside and downside capture relative to the sector average.
We then worked out each fund’s average decile ranking for the 10 metrics in order to discover which were most consistently at the very top of their peers for a wide spread of risk and return measures.
Performance of fund vs sector and index over 5yrs to end of 2017
Source: FE Analytics
The chart above shows the fund that has come out on top (the 30 best funds in the sector are revealed in a table further down the article). CFP SDL UK Buffettology has achieved an average decile ranking of just 1.5 over the five years in question; the fund was also top-ranked in last year’s research, when it scored 2.
Headed up by FE Alpha Manager Keith Ashworth-Lord, the £260.1m fund mirrors the investment style of Warren Buffett, holding the exclusive rights to the Buffett name and a 10-year licence period to copy the famed investor’s distinct long-term, value-orientated approach within a UK equity fund.
In keeping with this approach, Ashworth-Lord favours enduring franchises or well-established businesses that are household names or have a unique product, all coupled with good growth prospects. Top holdings at the moment include Games Workshop, AB Dynamics and Bioventix.
Our data shows that the fund is in the sector’s top decile for all but two of the 10 metrics; the exceptions are upside capture, where it sits in the second decile, and total return is 2016, which was fifth decile. The fund’s 148.63 per cent return over the five-year period is the sector’s fourth highest.
CFP SDL UK Buffettology has a 1.28 per cent ongoing charges figure (OCF) and holds five FE Crowns.
As the table below shows – which reveals the funds’ average decile rankings and their decile placing for each of the metrics – the £15.9m MFM Bowland fund is in close second with a 1.6 average decile ranking.
The five FE Crown-rated fund, which has a 0.90 per cent OCF, has been managed by Hargreave Hale’s Leon Shuall since March 2017 and has become one of the top performers in the sector. At the moment, Shuall tends to avoid more cyclically sensitive businesses and prefers companies that have strong operating histories, balance sheets or excess cash generation while displaying healthy growth potential.
Source: FE Analytics
In third place with a 2.2 average decile ranking is the £3.2bn Liontrust Special Situations fund, which run by the FE Alpha Manager duo of Anthony Cross and Julian Fosh. The five-crown fund, which focuses on companies with intangible assets such as desirable intellectual property, strong distribution channels and significant recurring business, was also ranked third in last year’s research.
Another large fund scoring highly is FE Alpha Manager Nick Train’s £4.8bn LF Lindsell Train UK Equity fund, which was the second best performer when we ran the study last year. It has dropped into sixth place this time around with a 2.5 average decile ranking and is top decile when it comes to five-year returns, alpha generation, maximum drawdown, Sharpe ratio and upside capture.
Not all of the sector’s biggest members have performed this strongly, however.
The largest active fund in the IA UK All Companies sector is FE Alpha Manager Mark Barnett’s £10.2bn Invesco Perpetual High Income fund, which achieved an average decile ranking of 4.7; this ranks it 83rd out of 237 funds. It has top decile numbers for volatility, maximum drawdown and downside capture but is in the peer group’s bottom decile for its returns in 2017 and upside capture.
Barnett’s £4.9bn Invesco Perpetual Income fund, which is the sector’s second biggest active fund, has a 4.9 average decile ranking and is placed 94th in the peer group.
Halifax UK Growth is the third biggest active fund in the peer group with assets of £4.9bn and its average decile ranking of 6.6 means it is in 167th place out of 237. Other large funds include the £3.2bn AXA Framlington UK Select Opportunities fund, which is in 176th place with a 6.8 average decile ranking, while the £3bn M&G Recovery fund sits in the 227th slot with an 8.3 average decile ranking.
Performance of fund vs sector and index over 5yrs to end of 2017
Source: FE Analytics
At the very bottom of the table is Scottish Widows UK Select Growth, which has an average decile ranking of 8.9. The £29.7m fund is in the bottom decile for five-year returns, alpha, maximum drawdown, Sharpe ratio, upside capture and downside capture.
The one FE Crown-rated fund has made a 21.50 per cent over the five years to the end of 2017, which is the lowest total return from the IA UK All Companies sector.
Other funds with the lowest average decile rankings include CF Purisima UK Total Return, HC Charteris Premium Income, Sanlam FOUR Active UK Equity, Halifax Special Situations and Aberdeen Global UK Equity.