Fundsmith Equity, Vanguard LifeStrategy 60% Equity and Liontrust Special Situations are some of the most dominant funds in their respective peer groups when it comes to the amount of research being carried out into them on FE Analytics, our analysis shows.
When reviewing the underlying research trends of the financial advisers, wealth managers and other professional investors on FE Analytics, it is easy to notice how certain funds are routinely the most heavily viewed through the platform.
These funds tend to have similar attributes: they are often among the largest in their peer group, have very strong track records and, unless they are a passive vehicle, tend to be headed by well-known managers.
We wanted to find out which funds were attracting far more research than their peers, so have looked at the level of research activity that went into the most popular fund in each peer group and compared with the average activity for that sector.
Performance of fund vs sector and index since launch
Source: FE Analytics, data to end of Apr 2019
This analysis showed that Fundsmith Equity is the most dominant fund relative to its sector on FE Analytics. The fund is often the most viewed on the research tool but this data highlights the extent to which it captures much more attention than its peers.
It accounted for 5.6 per cent of the research activity into the IA Global sector over the past 12 months; the average fund in the 367-strong IA Global sector should have received 0.27 per cent of views. This means Fundsmith Equity’s research is 1,938 per cent higher than the average.
Furthermore, the fund attracted much more research activity than the IA Global member in second place. First State Global Listed Infrastructure accounted for just 2.1 per cent of the peer group’s research traffic over the past year.
Of course, it’s not difficult to understand why Fundsmith Equity is such a heavily researched member of this competitive sector. With assets under management of £17bn, it is the largest member of the peer group (and the Investment Association universe as a whole) and has been its best-performing member since launch in November 2010 after making more than 335 per cent.
Headed up by FE Alpha Manager Terry Smith, the fund looks for companies with sustainable returns on capital of over 10 per cent with a bias towards large quality-growth franchises where growth is driven from reinvestment of cashflows. This tends to lead it to areas such as consumer staples, technology and healthcare, while avoiding cyclical sectors like airlines, banks and real estate.
The FE Invest team, which includes the fund on its Approved List, said: “This positioning is unlikely to change as the team is loyal to its investment philosophy and the low turnover is evidence of this. The fund should continue to perform well in the current low interest rate environment with slowly rising rates.”
Source: FE Analytics Market Intel Tool
As the chart above shows, some of other Investment Association sectors have funds that are taking the lion’s share of research activity on FE Analytics. We’ve restricted this research to sectors with 20 or more members.
In the 1,032-strong IA Unclassified sector, the research share taken by Allianz US High Yield is 1,637 per cent that received by the average member. The $2.2bn fund is managed by Doug Forsyth and has made a total return of close to 20 per cent over the past three years.
Stewart Investors Asia Pacific Leaders has been researched on FE Analytics 1,312 per cent more than the average IA Specialist fund. Stewart Investors are seen as some of the best Asian equity managers in the industry, with a long track record in applying its quality-growth approach to the region.
Closer to home, Liontrust Special Situations – which is headed up by the FE Alpha Manager duo of Anthony Cross and Julian Fosh – captured 3 per cent of research traffic in the IA UK All Companies sector. This is 886 per cent higher than the average.
This is another fund that has built a strong long-term track record, this time on the back of the managers’ ‘Economic Advantage’ process that looks for companies with intangible assets such as desirable intellectual property, strong distribution channels and significant recurring business.
Square Mile Investment Consulting & Research, which gives the fund an ‘AA’ rating, said: “This is a very well-considered and defined investment process which steers the managers towards relatively steady businesses that are gradually growing and generating high levels of cash. Essentially, the team is looking for companies operating with a clear and unique competitive edge.”
Performance of fund vs sector and index since launch
Source: FE Analytics, data to end of Apr 2019
Another finding from the analysis is how heavily researched the Vanguard LifeStrategy funds are in the Investment Association’s multi-asset sectors. This is in keeping with the high level of assets under management that these passive portfolios have attracted in recent years.
Three of the five Vanguard LifeStrategy funds have been the most researched member of their respective peer group over the past 12 months, with Vanguard LifeStrategy 60% Equity being the most dominant as its research traffic is 926 per cent higher than that for the average IA Mixed Investment 40-85% Shares fund.