CFP SDL UK Buffettology and Lindsell Train Global Equity are some of the funds that have been capturing a growing share of professional investors’ research into their respective sectors, analysis of FE Analytics data shows.
With the end of 2019 in sight, Trustnet has reviewed the research activity of the financial advisers, wealth managers and other professional investors that use FE Analytics to see what funds have been catching their eyes this year.
We’ve focused on the five largest sectors in the Investment Association universe and found out what share of their total research activity has gone into each fund. This was then compared with their average for the three years to the end of 2018, in order to see which have become more popular within their peer group during 2019.
Below, we highlight the five funds that have made the biggest jumps up the research rankings for these major sectors.
IA North America
We start with the IA North America sector, which is the fifth largest in the Investment Association universe with total assets under management of £63.6bn.
The most researched member of the peer group is Merian North American Equity, which has accounted for 4.29 per cent of the sector’s research this year. However, this is down from the 4.66 per cent share it held over the previous three years.
Source: FE Analytics Market Intel Tool
As the table above shows, Baillie Gifford American has benefitted from the biggest jump in FE Analytics research activity, moving from a 2.35 per cent share to 3.33 per cent today.
This comes after a strong run of performance: the £2.3bn fund has made top-decile total returns over the past three, five and 10 years. That said, it has slipped down the performance rankings over more recent time frames after its growth style fell out of favour.
The FE Invest team, which has the fund on its Approved List, said: “The firm’s clear focus on bottom-up stock selection and its ability to leverage its expertise in growth investing is clear and consistent across the fund range.
“Baillie Gifford American exhibits above-average volatility due to it being heavily concentrated in high conviction positions. The team chooses not to dilute the impact of strong companies in the name of diversification.”
However, the funds with the biggest fall in research are Schroder US Mid Cap, Fidelity American Special Situations, Legg Mason ClearBridge US Aggressive Growth, Artemis US Select and JPM US Equity Income.
IA Targeted Absolute Return
Next up is the IA Targeted Absolute Return sector, with its total assets under management of £67.2bn. As a whole, the sector has been falling in popularity over 2019 with net outflows from retail and institutional investors, data from the Investment Association shows.
BNY Mellon Real Return is the most researched member of this sector, reflecting its long track record and £8.9bn of assets. But its research share has fallen from 5.11 per cent to 4.07 per cent over the two periods examined here.
Source: FE Analytics Market Intel Tool
The fund that has seen the biggest increase in its research share is 7IM Real Return, which has climbed from 0.92 per cent to 1.60 per cent.
The five Crown-rated fund aims to deliver an inflation-beating return, whilst limiting sensitivity to equity price movements. Over the past three years, it has made a 7.45 per cent total return – compared with a gain of just 4.52 per cent from its average peer.
It has a multi-manager approach, owning the likes of NN (L) Multi Asset Factor Opportunities, MI TwentyFour AM Monument Bond, BlueBay Financial Capital Bond, AQR Managed Futures Strategy and Source Physical Gold ETC among its largest holdings.
ASI Global Absolute Return Strategies, Invesco Global Targeted Returns (UK) and BNY Mellon Real Return are the funds that were hit with the largest falls in research on FE Analytics.
IA Sterling Corporate Bond
The IA Sterling Corporate Bond sector is the third largest in the Investment Association universe with assets under management of £73.4bn, making it our next stop.
Rathbone Ethical Bond is the most heavily researched member of the peer group, accounting for 6.40 per cent of the research activity carried out into it on FE Analytics.
Source: FE Analytics Market Intel Tool
It is also the fund that has grown its share of FE Analytics the most over the two periods in question, as its share for the previous three years was 4.88 per cent.
The £1.4bn Rathbone Ethical Bond fund, which is top quartile over one, three, five and 10 years, combines top-down macroeconomic views and a bottom up credit selection, with an ethical overlay being the final stage of its process.
The FE Invest team said: “The fixed income team of three, led by Bryn Jones, is combined with an ethical research team of four. Jones strongly believes that he can improve society through selective debt financing and, over its history, the fund has invested in many educational and social housing programmes.”
The IA Sterling Corporate Bond members hit with the largest falls in the research share are Fidelity Moneybuilder Income, M&G Corporate Bond, Kames Investment Grade Bond, Invesco Corporate Bond (UK) and M&G Strategic Corporate Bond.
IA Global
The second largest Investment Association sector with total assets under management of £123bn is IA Global. This has been an increasingly popular peer group for several years.
Fundsmith Equity is the most researched member of this peer group, with a 5.32 per cent share of research of activity (although this is down from 5.43 per cent). It is also the most researched fund from the entire Investment Association universe.
Source: FE Analytics Market Intel Tool
The fund with the biggest increase in terms of sector research is arguably Fundsmith Equity’s biggest rival: Lindsell Train Global Equity. It has jumped up the research rankings (it was the 140th most researched fund on FE Analytics over the previous three years but is now the 18th) thanks to a strong track record.
Like the Fundsmith offering, Lindsell Train Global Equity has a quality-growth approach – which has been very much in favour over recent years. The £8.5bn fund is top-decile over one, three and five years, but has slipped down in recent months as its style started to underperform.
Managers Michael Lindsell, Nick Train and James Bullock look for leading companies that they believe will survive over the long term by staying ahead of structural market changes, allowing them to maintain their competitive advantages.
FE Invest said: “We have been very impressed by the team’s track record, and its performance is typically driven by stockpicking rather than its overweight and underweights to sectors versus the benchmark.”
The IA Global funds that have seen the biggest falls in their FE Analytics research share are M&G Global Dividend, Artemis Global Growth and Merian Global Equity.
IA UK All Companies
The largest peer group in the Investment Association universe is IA UK All Companies, despite the fact that the sector has suffered more or less constant outflows in recent years. Its total assets under management stand at £172.7bn.
Its most researched member is Liontrust Special Situations, which takes 3.20 per cent of FE Analytics activity in the sector. The fund, which run using Liontrust’s ‘economic advantage’ process, has a strong track record and has grown its research share between the two periods in question.
Source: FE Analytics Market Intel Tool
However, one IA UK All Companies fund has managed to capture a larger uptick in interest.
CFP SDL UK Buffettology took just 0.73 per cent of the peer group’s research over the three years to the end of 2018, but this climbed to 1.55 per cent in 2019.
FE fundinfo Alpha Manager Keith Ashworth-Lord has an official licence to implement the investment style of Warren Buffett (and use the Buffettology label) in Europe. This means the fund uses a rigorous process to identify companies with consistently high profitability and cash generated from intangible assets such as brands, people and patents.
Since launch in March 2011, the fund has generated a 234.74 per cent total return, making it the best performing member of the IA UK All Companies sector. Its also in the top decile over three and five years.
“We are impressed by Ashworth-Lord’s disciplined approach to investing and his strong ties with company management. His meticulous, patient and concentrated approach results in a genuinely active fund that has the potential to outperform the UK market,” FE Invest’s analysts said.
“Investors should be aware of the fund’s biases – avoiding banks and commodity-related sectors and a strong preference for small and mid-sized companies. These biases have affected performance in the past, though the manager’s stock picking skills have generally driven returns. It also means that this fund should be seen as a satellite investment to complement core UK equity exposure.”
IA UK All Companies funds such as Invesco High Income (UK), Liontrust UK Mid Cap, Invesco Income (UK), AXA Framlington UK Select Opportunities and Fidelity Special Situations have seen the largest declines in their sector research share this year.