Woodford Income Focus, Baillie Gifford Positive Change Equity and Evenlode Global Income were some of the most interesting new funds to launch in 2017, according to several market commentators.
Some investors choose not to invest in new managers and fund launches, as they believe that experience and evidence of the process over time is key for long-term success.
However, others do invest in new funds, seeking to take advantage of new talent and fresh ideas, as FE Trustnet highlighted at the end of last year.
Below, we take a closer look at the most interesting funds that launched in 2017 piquing the interest of investment professionals.
“The highest profile fund launch of last year was LF Woodford Income Focus,” Laith Khalaf, senior analyst at Hargreaves Lansdown said, so this seems like a logical place to start.
The £662m fund was launched in April 2017 by FE Alpha Manager Neil Woodford to provide consistent income to investors based on a five-year strategic view of the UK economy.
Woodford, who previously ran a number of funds at Invesco Perpetual, left the firm in 2014 to set up his own asset management firm, although he has maintained the same investment approach throughout his career.
Since its launch, the fund has struggled, however, and is down 4.64 per cent in a period that saw the FTSE All Share gain 0.61 per cent, as the below chart shows. Although as with all funds on this list the performance is over a relatively short time-horizon.
Performance of fund vs benchmark since launch
Source: FE Analytics
Khalaf said: “Neil Woodford has been through a difficult time of late, but an active approach to portfolio management inevitably leads to periods of underperformance, and his long and successful track record speaks for itself.”
However, before investing investors should agree with the manager’s long-term outlook as the manager does not take short-term price movements into consideration, analysts at FE Invest said.
“We recommend that investors be prepared for short periods of underperformance, and judge its success over the long term,” they noted.
The fund has a clean ongoing charges figure (OCF) of 1 per cent.
Another interesting launch from last year was the TB Evenlode Global Income strategy run by lead manager Ben Peters and co-manager Chris Elliott.
The £66m fund uses the same philosophy as the five FE Crown-rated TB Evenlode Income, which is headed up by FE Alpha Manager Hugh Yarrow with Peters as co-manager.
The £1.9bn UK fund, which has been a top quartile performer in the IA UK All Companies sector over three and five years as well as since launch, is allowed to invest up to 20 per cent outside the UK – something it takes full advantage of and has been a useful tool in implementing a global strategy, Peters said at a conference earlier in the year.
Performance of fund vs sectors since launch
Source: FE Analytics
The managers are seeking mid-to-high single-digit absolute returns per annum over the long term, with a commitment to increasing the fund's payouts at least in-line with inflation.
John Monaghan, research manager at Square Mile Research said: “We see this global strategy as a natural extension of the team's investment process which relies on a proprietary screen in order to greatly reduce the investible universe.
“Essentially, the team look to invest in quality companies with resilient profit streams, sustainable growth profiles and limited capital reinvestment needs or reliance upon leverage.”
The global equity fund is run using an unconstrained approach, meaning that it can look markedly different, particularly at the sector level, when viewed against the major market indices, with current overweights in consumer good, healthcare and technology stocks.
“However, the nature of the companies held should mean the fund will be better insulated from a sharp market downturn, though the flip side is that it is unlikely to outperform in a strongly rising market, especially when more cyclically sensitive stocks are leading the way,” Monaghan added.
“Overall, we feel this is a sensible managed strategy and should serve investors with a medium to long-term investment horizon well.”
TB Evenlode Global Income has an OCF of 0.9 per cent.
The final equity fund on the list is the £23m Baillie Gifford Positive Change fund, which invests in 25-50 stocks that the management team believes offer products that can make a positive impact on the world.
Launched in January 2017, the portfolio is run with a high-quality growth bias. It has made a strong start since its inception, returning 50.1 per cent versus the IA Global sector’s 11.47 per cent and MSCI AC World benchmark’s 9.1 per cent returns.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Neil Shillito, fund manager at Downing, said: “The fund that caught my attention last year was the launch of the Baillie Gifford Positive Change Equity, for two reasons.
“First, Baillie Gifford, despite its size, has all the ‘boutique’ characteristics that I look for in a fund manager i.e. talented, disciplined and aligned and the company has an immaculate pedigree of recruiting, training and promoting talent.”
Second is the strong environmental, social and governance [ESG] stance the fund takes, which should help to focus the fund on a better quality of company.
“I believe that drilling deeper to understand a company’s credentials in terms of ethos and responsibility quite literally pays dividends,” Shillito said.
“There is no guarantee that Baillie Gifford’s Positive Change Fund will be a ‘top performer’ or even withstand the test of time, but if I were betting on the 3.30 at Newmarket and had the choice of the thrice winner favourite or the donkey with a broken leg in the outside stall…”
Baillie Gifford Positive Change Equity has an OCF of 0.6 per cent.
Away from equity-only funds, Rob Burdett, co-head of the multimanager team at BMO Global Asset Management, said another interesting launch last year was the Man GLG UK Absolute Value fund.
The £280m fund run by Jack Barrat and supported by FE Alpha Manager Henry Dixon. The pair also co-manage the four FE Crown-rated Man GLG Undervalued Assets fund.
The portfolio uses a long/short equity approach that aims to deliver a positive return over rolling three-year periods.
It uses a process to identify over- and undervalued assets in the UK mid-cap sector. It is currently 6.26 per cent net long.
Burdett said Man GLG are a very sophisticated asset management house that could provide full replication testing with their own capital to try out Jacks skills which means it is an audited record
“The fund has done very well since launch, and crucially did well this year into falling markets,” he added.
Since inception in June last year, the fund has returned 11.5 per cent and year-to-date it is up 2.58 per cent. Man GLG UK Absolute Value has a OCF of 0.9 per cent.
Last up, Informed Choice managing director Martin Bamford said he struggles to get excited by new fund launches, as one of the firm’s fund selection criteria is to only recommend portfolios with an established track record of at least three years.
However, one fund range that did catch his eye is the Franklin Templeton LibertyShares Smart Beta ETF range launched in September and October last year.
“Smart beta is an interesting concept which, in a market where price is being driven lower by the growing popularity of index trackers, could play an important role in the future,” Bamford (pictured) said.
“No investment decision is ever truly passive, and smart beta funds can strike the right balance between low cost and added value from a defined rules-based approach to investing.”
The LibertyShares range has ongoing charges of between 0.25-0.55 per cent.