Fourteen funds have won five FE Crowns at their first available opportunity, following the latest rebalancing of the ratings.
The bi-annual rebalance of the FE Crown Fund Ratings has taken place and offerings from fund houses such as T. Rowe Price, Legal & General Investment Management and Royal London have been awarded the top rating in their first review.
In order for a fund to be awarded an FE Crown rating, it must have a minimum of three-years of history and this time around, only 14 got five crowns out of the 117 funds that were awarded a rating for the first time.
First up, we look at the T. Rowe Price Japanese Equity fund, which is the only fund that is also included on the FE Invest Approved List.
Although an offshore version of the fund launched in 2006 and already has five FE Crowns, the onshore mirror only launched last year and is now getting rated for the first time. T. Rowe Price Japanese Equity was rated on the performance of the offshore fund, which has a long-enough track record to qualify.
One thing the team at FE Invest likes about the fund is the change of style brought in by manager Archibald Ciganer.
Tanvi Kandlur, an analyst with FE Invest, said: “Since Archibald Ciganer began managing the fund in late 2013, he increased the portfolio’s exposure to growth companies, reduced the number of stocks and increased exposure to small and mid-sized companies.
“Under Ciganer, alpha generation relative to the benchmark has improved considerably where the largest proportion of the fund’s outperformance over the benchmark has come from stock selection, which is encouraging.”
The onshore fund is up 19.16 per cent since launch, compared to its average IA Japan peer’s return of 10.78 per cent and the Topix’s 9.40 per cent.
Performance of fund since launch vs sector and benchmark
Source: FE Analytics
T. Rowe Price has two other funds that were awarded five FE Crowns in the first instance: FE Alpha Manager David Eiswert’s Global Focused Growth Equity fund and the Global Natural Resources Equity fund, which also run by an FE Alpha Manager, Shawn Driscoll.
Both of these funds were launched in 2017 but have been rated on the performance of an established offshore fund, which they are mirroring.
Also earning five FE Crowns for the first time in the Japanese sector is RWC Nissay Japan Focus, which has been a strong performer since launch in March 2015 and gained 76.53 per cent compared its average IA Japan peer’s return of 45.11 per cent.
The fund aims to generate significant alpha through careful and rigorous selection of stocks and this has proven to be the case because it has the sector’s third best alpha generation since inception of 10.36.
It’s not for the faint-hearted investor, however, as it has had some of the highest volatility in the sector, so investors have had to be comfortable riding out short-term losses.
In a recent note to investors, manager Yasuaki Kinoshita said he doesn’t expect this to change.
“We expect continued market volatility, particularly in the kinds of quality stocks in which we invest. Continued sentimental swings between cyclical/cheap and defensive/expensive issues are likely to be accompanied by swings between exporters and domestic stocks as trade war worries ebb and flow.”
Two bond funds made the list including the largest fund to receive five FE Crowns for the first time in this rebalance, the £1.4bn Royal London Enhanced Cash Plus fund, which yields 1.24 per cent and has a duration of 0.8 years.
It is a low-risk fund and has an average volatility of 0.29 per cent since launch. Almost all of its fixed income holdings are investment grade-rated, while a quarter of the fund is held in money market instruments.
The other bond fund to make the list is TwentyFour Corporate Bond, which is run by Chris Bowie and Gordon Shannon.
It also invests predominantly in investment grade bonds but allows up to 25 per cent to be allocated to high yield.
Analysts at Square Mile Investment Consulting and Research said there are plenty of things to like about this fund including the capable managers who have worked together for a number of years and the well-regarded team behind them at TwentyFour Asset Management.
They added: “There is a strong focus on delivering attractive risk-adjusted returns while retaining the basic characteristics of the corporate bond universe.
“The fund will thus always retain a healthy degree of interest rate risk, which could prove to be an attractive diversifier in a balanced portfolio, as well as exposing investors to credit risk and the extra returns above government bonds which this should generate over time.”
Performance of fund since launch vs sector
Source: FE Analytics
Indeed, the fund has a duration of 6.7 years, while yielding 4.25 per cent.
TwentyFour Corporate Bond aims to produce a total return greater than that of the IA Sterling Corporate Bond sector and since launch it has done so, with a total return of 15.03 per cent against its average peer’s return of 11.08 per cent.
There is one absolute return newcomer that has received five FE Crowns, L&G Multi-Asset Target Return.
Since launch, it is up 12.15 per cent, while its average IA Targeted Absolute Return peer is up 4.68 per cent over the same period.
The fund’s target volatility is between 6-10 per cent but since launch it has had an average volatility of 4.46 per cent.
Elsewhere in the list, True Potential Investments has four of its portfolios included in the rebalance that achieved the five-crown status: Defensive 2, Balanced 2, Growth 2 and Aggressive 1.
The funds are sub-managed by SEI Investments and asset allocation varies throughout the four between equities, fixed income and cash.
In the past three years, the almost exclusively equities-tilted Aggressive 1 fund has returned 43.71 per cent, Growth 2 has returned 39.39 per cent, Balanced 2 is up 32 per cent and the cash-heavy Defensive 2 fund has gained 10.32 per cent.
Omnis Investment’s Multi-Asset Income fund is also on the list, which is managed on an outsourced basis by Newton’s Paul Flood and deputy manager Nick Clay.
Flood runs two multi-asset mandates at Newton and one at BNY Mellon and provides asset allocation for the wider house.
Omnis Multi-Asset Income is more-aggressively positioned and has a high exposure to equities, while allocations to alternatives (16.99 per cent) count for nearly as much as fixed income (19.90 per cent).
Since launch, it has returned 31.37 per cent while its average IA Unclassified peer is up 22.76 per cent.
New five FE Crown-rated funds
Source: FE
The last two funds to receive to accolade are IFML Vitality Global Equity and the investment trust Volta Finance from AXA Investment Managers Paris.