The £69m Unicorn Mastertrust fund has come out on top of an FE Trustnet study looking at a broad spread of risk and return metrics in the IA Flexible Investment sector, with funds from Premier, Miton and JP Morgan also scoring highly.
In this ongoing series of articles, we are reviewing funds for their cumulative five-year returns up to the end of 2017, 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.
The average decile ranking for these 10 metrics is then worked out for each fund in the sector to find out which were most consistently at the very top of their peer group and it is now the IA Flexible Investment sector’s turn under the microscope.
Performance of fund vs sector and index over 5yrs to the end of 2017
Source: FE Analytics
As mentioned, it’s FE Alpha Manager Peter Walls’ Unicorn Mastertrust fund that came out on top of the peer group after establishing an average decile ranking of 1.8. The fund is in the top decile for five-year returns (as well as performance in 2017 and 2015), alpha generation, maximum drawdown, Sharpe ratio and downside capture.
This is the second year running than Unicorn Mastertrust has taken first place in this research; at the end of 2016 it was at the top of the table with an average decile ranking of 2.4.
The five FE Crown-rated fund is built around a portfolio of investment trusts and Walls is a contrarian investor who only buys trusts trading on a discount to their net asset value. The portfolio’s top holdings at present include Foreign & Colonial, Standard Life Private Equity and Blackrock World Mining Trust.
In the fund’s most recent annual report, Walls highlighted the growing popularity of investment trusts among investors: “It is encouraging to note that retail investor interest in investment companies continues to grow and that the attractions of the trust structure are becoming more widely recognised. Many investment companies have reduced management fees in the face of increased competition while some have introduced tiered fee structures which pass on some of the economies of scale to underlying investors.”
As the table below – which reveals the 25 best performing IA Flexible Investment funds according to this research – shows, Premier Multi-Asset Global Growth comes in second place with a 2.3 average decile ranking and a five-year total return of 96.51 per cent.
Managed by David Hambidge, Ian Rees, Simon Evan-Cook and David Thornton, the £190.4m fund is top decile for total returns over five years and in 2015, alpha, Sharpe ratio and upside capture. It also holds five FE Crowns.
This is funds of funds portfolio that counts Polar Capital Global Insurance, Evenlode Income and GLG Japan CoreAlpha Equity among its top 10 holdings. The managers behind the fund have a contrarian approach that puts a strong emphasis on valuations
Source: FE Analytics
LF Miton Worldwide Opportunities, which managed by Nick Greenwood, is next. The fund also scored an average decile ranking of 2.3 but its five-year return is lower than the Premier offering at 84.52 per cent; it is in the sector’s first decile for 2017 performance, alpha, annualised volatility, maximum drawdown, Sharpe ratio and downside capture.
The five FE Crown-rated fund also uses a multi-manager approach and has exposure to the likes of Taliesin Property, Atlantis Japan Growth and Baker Steel Resources Trust.
In his latest update, Greenwood said he has been adjusting the portfolio in light of rising bond yields and better economic numbers: “We foresee this creating some market upheaval in asset prices, which throws up interesting new opportunities for us and we continue to monitor closely to ensure we are positioned to take advantage of this. As we have likely entered a period of synchronised global growth, demand for capital is increasing in response to higher economic activity therefore, we have been tweaking up our exposure to the mining sector, as cyclicals should prosper in this environment.”
The largest fund in the sector is Carmignac Patrimoine, with assets under management of £19bn. This fund is towards the bottom of the list, coming in 111th out of 120 after its average decile ranking amouted to 7.9 following bottom-decile numbers for five-year performance, returns in 2015 and 2017, and Sharpe ratio.
Troy Trojan, the second largest fund in the peer group, sits in 85th place after scoring 6.4 while Pyrford Global Total Return – the third biggest fund – also has an average decile ranking of 6.4 but a lower five-year return pushed it down into 86th place.
Performance of fund vs sector over 5yrs to the end of 2017
Source: FE Analytics
At the very bottom of the table is Carmignac Portfolio Emerging Patrimoine. This fund has an average decile ranking of 8.9 following bottom-decile numbers for five-year total returns, alpha, maximum drawdown, Sharpe ratio and upside capture.
Capital Group Emerging Markets Total Opportunities (LUX), City Financial Multi Asset Dynamic and LF Odey Opus have also produced some of the IA Flexible Investment sector’s highest average decile returns over the five years examined in this research.