‘Balanced’ multi-asset funds run by the likes of Premier Asset Management, Hawksmoor Investment Management and BMO Global Asset Management have produced some of their peer group’s highest returns along with attractive risk metrics, the latest FE Trustnet research suggests.
The IA Mixed Investment 40-85% Shares sector is one of the Investment Association’s largest peer groups with total assets under management of £55.5bn and home to some of the best-known multi-asset managers in the business.
As part of an ongoing series, we have reviewed the sector’s members across 10 different metrics to see which have been at the top of the peer group for both returns and risk over recent years.
To do this, we have the ordered funds for the average decile rankings of their 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.
Performance of fund vs sector over 5yrs to the end of 2017
Source: FE Analytics
Coming in first place in this research with an average decile ranking of 1.5 is the £802.8m Premier Multi-Asset Growth & Income fund, which is managed by David Hambidge, Ian Rees, Simon Evan‑Cook and David Thornton.
As the chart above shows, the five FE Crown-rated fund made an 80.95 per cent total return over the five years considered in this research, putting it in the top decile and making it the sector’s fourth highest returner overall; it’s also in the top decile for returns in 2015, alpha generation, annualised volatility, Sharpe ratio and downside capture.
Analysts at Square Mile Investment Consulting & Research are fans of the Premier multi-asset team’s valuation-orientated approach and have awarded Premier Multi-Asset Growth & Income an ‘A’ rating.
“The valuation aware focus aims to ensure they are always seeking to invest into what they perceive is a discount to the current market value,” Square Mile said. “This not only provides a potential to pick up on the discount to market value but also provides a downside hedge, based on the lower point of entry.”
As can be seen from the below table – which shows the 30 best performing funds in this study – MFM Hathaway is in second place with a 2.2 average decile ranking. The £14.6m fund is relatively off-the-radar and is not available on the major platforms, but has established a strong long-term track record; its 10-year total return of 119.76 per cent is the second highest in the peer group.
MI Hawksmoor Distribution comes in third place with an average decile ranking of 2.6 and first-quartile numbers for alpha generation, annualised volatility, maximum drawdown, Sharpe ratio and downside capture.
Source: FE Analytics
The £111.3m fund – which is managed by Daniel Lockyer, Richard Scott and Ben Conway – is a fund-of-funds portfolio that aims to deliver a growing income stream with a generally contrarian approach and a desire to have a ‘margin of safety’ in investments. Top holdings at the moment include Royal London Short Duration Global High Yield Bond, Prusik Asian Equity Income and Man GLG UK Income.
Other notable funds in the top 10 of this research include F&C MM Navigator Progressive, which is run by multi-manager veterans Gary Potter and Rob Burdett, and Mike Fox’s Royal London Sustainable World Trust, which will only invest in companies advocating positive change.
The largest IA Mixed Investment 40-85% Shares member is the £8.7bn BlackRock NURS II Consensus 85 fund, which is a portfolio for passive investments, and it comes in 42nd place out of 116 funds with an average decile ranking of 5.
Some large funds have fared better in this study. The £3.7bn Vanguard LifeStrategy 60% Equity fund – which is another multi-asset portfolio built from passive strategies – is in 16th place with a score of 3.5 while the £3.1bn Baillie Gifford Managed fund is placed ninth with a 3.2 average decile ranking.
Other large balanced multi-asset funds include OM Cirilium Moderate Portfolio (ranked 13th with a score of 3.5), Newton Multi-Asset Balanced (ranked 107th with a score of 7.6), Vanguard LifeStrategy 80% Equity (ranked 8th with a score of 3.1), Jupiter Merlin Balanced Portfolio (ranked 28th with a score of 4.1) and Schroder Managed Balanced (ranked 79th with a score of 6.3).
Performance of fund vs sector over 5yrs to the end of 2017
Source: FE Analytics
At the very bottom of the table is Carvetian Fenix Balanced, which our research shows as having an average decile ranking of 9.4.
The £34.7m fund is in the IA Mixed Investment 40-85% Shares sector’s bottom decile for its five-year performance, returns in 2016 and 2017, alpha generation, annualised volatility, maximum drawdown, Sharpe ratio and downside capture.
It is joined at the bottom of the table by City Financial Multi Asset Growth (average decile ranking of 9.4), L&G Multi Manager Balanced Trust (average decile ranking of 8.7) and TB Doherty Active Managed (average decile ranking of 8.2).