The semi-annual rebalancing of the FE Crown ratings has revealed an almost 10 per cent rise in the number of funds achieving the maximum number of FE Crowns and BlackRock emerging as the group with the most top-rated funds, according to FE Invest. 
The latest rebalance saw 377 funds from the Investment Association universe with a minimum three-year track record awarded five FE Crowns – a rise of 8.93 per cent from last year – which is made up of the top 10 per cent of funds based on their total scores according to the FE Crown rating system.
The next 15 per cent receive four FE Crowns, with the following 25 per cent of funds are awarded three FE Crowns, the next 25 per cent gain two FE Crowns and the bottom 25 per cent awarded one.
The ratings are calculated by a ‘crown score’ made up of three parts, with each element calculated in reference to a benchmark of the fund.
The three parts are: an alpha test, a volatility score and a consistency score. These three tests are then applied to the overall return history of the fund, for which three-years of history is required.
Charles Younes (pictured), research manager at FE, said: “We believe that quantitative ratings have an important role to play in supporting accurate and fair comparisons of historic performance but not future performance.
“Our objective is to make the market more transparent and accessible – ultimately it’s about helping people make better investment decisions.”
Asset manager BlackRock emerged at the top of the table for the most five FE Crown-rated funds in the latest rebalance having move from ninth to first place.
Groups with the highest proportion of five FE Crown rated funds
Source: FE Analytics
Tanvi Kandlur, senior fund analyst at FE, said: “Many of BlackRock’s funds have seen upgrades at this rebalance reflecting the strong performance across the wide range of strategies the firm offers.”
She added that Liontrust also deserved a mention as over 50 per cent of their funds has achieved a five FE Crown, the highest overall proportion of their funds with a top rating.
Sophie Meatyard, fund analyst at FE, said strong performance within its Liontrust Sustainable fund range had helped boost the asset manager’s overall position in the table.
She said: “The funds have outperformed their respective benchmarks significantly, driven by their decisions to exclude oil & gas companies which has been a good call and for many funds, structural biases towards technology companies has been positive.
“On top of this stock selection for the individual funds has been excellent.”
There were also a number of previously top-rated funds that sunk to a one FE Crown rating following the latest rebalance.
Top rated funds that have dropped the most
Source: FE Analytics
One of the most notable is the £45.2m Orbis Global Balanced fund, overseen by FE Alpha Manager Alec Cutler, which slipped from five FE Crowns to one FE Crown. Over three years to 30 June 2016 the fund has made a 20.94 per cent total return.
The fund seeks to balance returns, capital growth and risk of loss through a globally diversified portfolio of stocks and bonds.
It was joined by two funds from Stewart Investors – Stewart Investors Worldwide Equity and Stewart Investors Worldwide Select – which have returned 30.71 per cent and 28.88 per cent respectively over three years.
Another fund to fall in the FE Crown Ratings is the fund is the £1.8bn Jupiter Income Trust, which is run by veteran manager Ben Whitmore. The fund’s value style has been out of favour for much of the recent past and it has failed to beat its FTSE All Share benchmark over the three tears to 30 June, returning 22.84 per cent against a 29.51 per cent gain for the index.
More broadly, the Investment sector with the greatest proportion of five FE Crown-rated funds was the IA Sterling Strategic Bond sector where 26 of its 81 funds were awarded the maximum rating.
It was followed by the IA North American Smaller Companies sector where 21.4 per cent received five FE Crowns, and the IA UK Smaller Companies sector with 18.8 per cent. Although it should be noted that these are both much smaller sectors.
Sectors with the highest proportion of five FE Crown-rated funds
Source: FE Analytics
“Over the last three years, bond markets went through an entire cycle. Strategic bond managers benefitted from their flexibility to invest across the fixed income spectrum,” said Younes.
“As a result, strategic bond managers generated returns with less volatility, and more compelling risk-adjusted returns.”
However, while some sectors saw an increase in the proportion of five FE Crown-rated funds there were several peer group where no funds achieved the highest rating.
Indeed, six sectors failed to produce any five Crown-rated funds, including: IA European Smaller Companies, IA Global Equity Income, IA Japanese Smaller Companies, IA Short Term Money Market, IA Standard Money Market, and IA UK Equity & Bond Income.