Some 23 funds have just had their first year in the bottom quartile of their sector after the turbulent conditions of 2018 wrong-footed a number of managers with previously strong track records.
Earlier this week, FE Trustnet looked back over the 11 full calendar years since the financial crisis of 2008 to discover which Investment Association funds have just have their only top-quartile year of this period.
Comgest Growth America, Fidelity American, M&G Global Macro Bond, BMO MM Navigator Distribution and Royal London UK Equity were some of the names doing this.
In the following article, we have turned things on their head and looked for funds that have a track record covering all 11 years but when 2018 was the only one they fell into the bottom quartile.
Performance of fund vs sector by calendar year
Source: FE Analytics
The chart above shows the fund that did this with the largest loss in 2018. Merian UK Smaller Companies Focus was down 17.38 per cent last year, ranking it 46th out of 49 funds in the IA UK Smaller Companies sector.
Until last year, the £325m fund had a very strong track record. It had been in the peer group’s top quartile for the previous three years; over period spanning 1 January 2008 to 31 December 2018, the fund made a 305.33 per cent total return – the second highest in the IA UK Smaller Companies sector.
The FE Invest team has put Merian UK Smaller Companies Focus on its Approved List of preferred funds for its strong track record but noted that it is the most concentrated portfolio run by the smaller companies desk at Merian.
“The fund is aggressively structured with large holdings in single stocks and money invested in very small companies, so investors should be prepared for significant price swings,” FE’s analysts added.
One more member of the IA UK Smaller Companies sector can found on the below list: R&M UK Equity Smaller Companies.
The fund with the biggest upset to its track record over the past decade or so, however, is Insight UK Index Linked Bond.
Source: FE Analytics
The £285.6m fund had been in the top quartile of the IA UK Index Linked Gilts sector during eight of the prior 10 years but was in the fourth quartile in 2018 with a 1.61 per cent loss.
Over the full period covered in this research, the fund has made a 150.16 per cent total return. This is the highest return of the peer group, where the average member made 113.98 per cent.
When it comes to the largest funds on the list, both are from the IA Sterling Corporate Bond sector – Aberdeen Corporate Bond, which has a £1.6bn portfolio, and the £1.4bn Kames Investment Grade Bond fund.
However, it’s the IA Flexible Investment sector that has the most members on the above list. Four funds from the peer group have just had their first bottom-quartile year since at least 2008.
The sector is home to a diverse range of funds, that – as the names suggests – have a great deal of flexibility in how their portfolios are positioned.
Invesco Managed Growth (UK), 7IM Adventurous, Aviva Investors Multi-Manager Flexible and Standard Life Wealth Bridge all slipped into the bottom quartile for the first time.
Source: FE Analytics
In addition to the funds with a track record covering the full 11-year period, we also examined funds with a shorter history (but a minimum of three years) to discover which have just had their first ever fourth-quartile year.
The table above, which again ranks them in order for losses in 2018, shows 15 of the 53 funds doing this. At the top is Jupiter Global Emerging Markets with its 21.94 per cent loss.
Jupiter Global Emerging Markets has an unconstrained mandate and, as a result, can perform very differently to the index. While it tends to be less defensive than its typical peer, since launch in November 2010 it is in the sector’s second quartile with a 29.93 per cent return.
Other well-known funds from the full list of 53 that have just had their first bottom-quartile year include FP CRUX European Special Situations, Artemis Global Income and Premier Multi-Asset Global Growth.