Funds run by Zurich and Newton are among the top performing higher-risk, multi-asset funds that have recently launched, according to FE Trustnet.
In this series, we look at the funds that launched in the first half of 2015 and are now coming up to or have just passed their three-year anniversary. The first sectors that we look at are the more aggressive mixed asset sectors: IA Flexible Investment and IA Mixed Investment 40-85% Shares.
Across the two sectors there were 10 funds that launched in the first half of 2015 and research by FE Trustnet reveals a mixed bag of performance results. It should be noted that for this study we have looked at all funds since launch.
As funds in these sectors typically have a range of performance benchmarks, for the funds in the IA Flexible Investment sector we have used the FTSE UK Private Investor Growth index as a comparable benchmark. For those in the IA Mixed Investment 40-85% Shares sector, we have used the FTSE UK Private Investor Balanced index.
Of the 10 funds studied, three of the best performers are run by Zurich. The Zurich Horizon Multi-Asset III, Zurich Horizon Multi-Asset IV and Zurich Horizon Multi-Asset V have all posted top quartile returns in their sectors since launch to end-April 2018.
The Horizon range of five funds including the three above was merged with the Threadneedle multi-asset range in March 2015, and continues to be run by Threadneedle.
While the funds have been running for one year longer than this study, as they took their current form in 2015 we have included them.
Zurich Horizon Multi-Asset V is the most risk-on of the three funds and has returned 38.15 per cent since launch up to the end of April 2018. It allocates 95 per cent of its fund to equities with 5 per cent in property.
It has beaten the FTSE UK Private Investor Growth index by 11.32 percentage points and the average IA Flexible Investment sector peer by 17.48 percentage points, as the below chart shows.
Performance of fund since launch vs sector & index over 3yrs
Source: FE Analytics
Turning to the IA Mixed investment 40-85% Shares sector, Zurich Horizon Multi-Asset IV returned 32.93 per cent in the same period, while the FTSE UK Private Investor Balanced index and the fund’s sector returned 9.46 and 13.52 percentage points less respectively.
The fund has 80 per cent invested in equities, 10 per cent in fixed interest and 10 per cent in property.
Although both funds have seen more volatility than their average peer this has been compensated for, as they have produced top decile risk-adjusted returns as measured by the Sharpe ratio compared to their peers.
Top decile alpha generation demonstrates superior stock picking from fund manager Alex Lyle, who has overseen all five funds in the Horizon range since their launch.
The third fund run by Zurich on the list, Zurich Horizon Multi-Asset III, is the largest of the 10 with £172.7m in assets under management. Like the previous two it has produced top quartile returns since launch to the end of April 2018, up 26.16 per cent.
Volatility for the fund is 6.62 per cent, which puts it in the top quartile of its sector, whereas the two above-mentioned Zurich funds have produced third-quartile volatility figures.
This could be explained, in part, to its more conservative asset allocation split. The fund invests 60 per cent in equities and 30 per cent in fixed income with the final 10 per cent going into property.
However, the relative return of Zurich Horizon Multi-Asset III is actually the lowest out of the three funds despite being in the top quartile amongst its peers.
Zurich Horizon Multi-Asset III, Zurich Horizon Multi-Asset V and Zurich Horizon Multi-Asset IV all won five FE Crowns at the first available opportunity and have ongoing charges figures (OCF) of 0.81 per cent.
Performance of fund since launch vs sector & index over 3yrs
Source: FE Analytics
The second largest fund in the list is the £127.7m Newton Multi-Asset Income fund which has been run by FE Alpha Manager Paul Flood since its inception in February 2015.
The manager has guided the fund to returns of 30.51 per cent, outperforming its average peer by 6.22 percentage points since launch to the end of April 2018. FTSE’s UK Private Investor Growth index saw performance of 28.66 per cent in the same period.
Low volatility has complemented the fund’s second quartile performance and has given the fund a top decile Sharpe ratio while relative returns rank the fund in the third decile of its peers for this metric.
Newton Multi-Asset Income is the cheapest fund in the list with an OCF of 0.78 per cent and invests roughly 50 per cent of its portfolio in equities and 23 per cent in fixed income.
Performance of funds since launch and quartile ranking
Source: FE Analytics *all figures to end April 2018
The remaining funds in the list have not fared as well since their launches. Although beating its peers by 6.07 per cent and producing second quartile returns, the MI Diversified Strategy fund has underperformed the FTSE UK Private Investor Growth index by 0.48 percentage points since its launch and carries an OCF of 1.31 per cent. The fund has a 75 per cent weighting towards equities.
IFSL James Hambro Harrier Balanced is slightly more expensive with an OCF of 1.51 per cent and has underperformed both the IA Mixed Investment 40-85% Shares sector and the FTSE UK Private Investor Balanced index since inception.
The worst performing funds from the list of 10 since their launches to the end of April were Troy Spectrum Income, Coram Global Opportunities, BNY Mellon Dynamic Total Return and Virgin Bond Gilt UK and Overseas Share.
All four funds had performance returns in the fourth quartile of their peer groups and have OCFs of more than one per cent.