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The funds hit with the biggest FE Crown Rating downgrades

23 January 2017

As the FE Crown Ratings go through their latest rebalancing, we find out which funds now hold one FE Crown – having previously been much higher.

By Gary Jackson,

Editor, FE Trustnet

With the latest rebalancing of the FE Crown Ratings complete, we have already seen that a number of funds have received five crowns in their first ever rating while several more have seen a big jump up the rankings table.

Fidelity Asian Dividend and three of the L&G Multi-Index fund range are among those winning five FE Crowns in their first ever rating, while the likes of Sarasin Food & Agriculture Opportunities and WAY Charteris Gold & Precious Metals have benefitted from big upgrades.

However, the ratings are a two-way street and some funds have found that their performance over the past three years – the FE Crown Ratings examine alpha, volatility and total return over three years – has resulted in a number sinking to the bottom of the table.

In the latest rebalancing, three funds have gone from holding the top FE Crown rating of five to just one. One of these is in the IA Global sector, one is a multi-asset fund and the final one resides in the IA UK Index Linked Gilts sector.

Performance of fund vs sector over 3rs to the end of 2016

 

Source: FE Analytics

The IA Global fund is Henderson Multi-Manager Global Select, which is managed by Henderson’s multi-asset team. As the chart above shows, it has underperformed its average peer by more than 12 percentage points over the past three years.

It also made bottom-quartile returns in 2014 and 2015 before moving into the third quartile last year. In addition, the £65.9m fund is bottom quartile over three years when it comes to metrics such as alpha generation and Sharpe ratio as well as having being slightly more volatile than its average peer.


JPM Global Macro Balanced, managed by Talib Sheikh, Gareth Witcomb and James Elliot, is the multi-asset fund falling to a one FE Crown rating; it is in the IA Mixed Investment 0%-35% Shares sector.

The £169.3m fund has made an 11.74 per cent total return over the three years to the end of 2016, putting it in the bottom quartile of its peer group. It has also underperformed its JPM GBI Global ex-UK and MSCI World benchmarks by a wide margin.

Performance of fund vs sector and indices over 3rs to the end of 2016

 

Source: FE Analytics

That said, the fund has been less volatile than both its benchmarks over the past three years although its annualised volatility is about 50 basis points higher than its average peer’s. And although it underperformed the sector average in 2016, it was top quartile in 2015 and 2014.

The final fund moving from five FE Crowns to just one is F&C Inflation Linked Annuity Conversion, which is managed by Alex Soulsby and Robert Crewe. Soulsby is the head of liability driven investment and the fund has a specialist target: to match a benchmark based on inflation-linked annuity prices with the aim of reducing the annuity conversion risk for pre-retirement funds.

Over the past three years it has made a bottom-quartile total return of 45.37 per cent, compared with 46.80 per cent from its average peer.

The fund was the second best performer in the IA UK Index Linked Gilts sector in 2014, but slipped into the third quartile in 2015 before falling into the bottom quartile last year. However, over the past three years it has been less volatile than its average peer.


In all, 33 funds that previously held an FE Crown rating of five have been downgraded to one, two or three crowns. The complete list of these can be found in the below table.

 

Source: FE

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.