Around a quarter of funds gained or lost an FE Crown in the latest semi-annual rebalancing of the fund ratings, with a number of new top-ranked funds and some previously highly-rated funds slipping.
Analysts at FE build a score based on the fund’s performance over the previous three years, looking at alpha, relative volatility and consistent performance.
The top 10 per cent of funds are awarded five crowns, while the next 15 per cent receive four crowns and each of the remaining three quartiles given three, two and one crown respectively. The ratings are rebalanced semi-annually in January and July.
Mika-John Southworth, director at FE said: “We rate all funds with a three-year history and we do not charge anyone for this service.
“We believe that quantitative ratings have an important role to play in supporting accurate and fair comparisons of historic performance.
“Our objective is to make the market more transparent and accessible – ultimately it’s about helping people make better investment decisions.”
Asset managers with the most top-rated funds
Following the rebalancing, the asset manager with the firm with the most top-rated funds was Old Mutual Global Investors overtaking rival Fidelity International which had previously held the accolade.
The asset manager has 13 five crown-rated funds as of the latest rebalance compared with 11 each for Fidelity International, Janus Henderson Investors and T. Rowe Price. Jupiter Asset Management rounds out the top five with 10 funds with the highest crown rating.
Source: FE Research
Old Mutual’s five crown-rated funds include six funds from its multi-asset range, overseen by FE Alpha Manager Paul Craig. It also includes two funds managed by FE Alpha Manager Richard Watts and one by FE Alpha Manager Luke Kerr.
While Old Mutual took top spot overall, T. Rowe Price saw the biggest shift in funds achieving five-crown ratings with nine funds upgraded compared with eight of Old Mutual’s funds.
Following the rebalance, the IA Global sector emerged as having the most top-rated funds with 30 of its constituents awarded five crowns.
Other top sectors for crown ratings included the IA Specialist sector with 26 and the IA Europe Excluding UK where 22 attained the coveted ranking.
At the other end of the spectrum, there were no five crown-rated funds in the IA Global Equity Income, Short Term Money Market or UK Gilts sectors.
Rob Gleeson, head of FE Research, said: “It has been an eventful six months both economically and politically since our last rebalance and markets have continued to be difficult for managers to predict.
“From a sector perspective, the latest rebalance shows a similar story to January’s FE Fund Crowns. Managers are generally finding fertile ground in more specialist, less researched industries which is where active management is widely believed to pay dividends.
“Funds that are looking for higher yields to boost returns are struggling in the low-rate environment, and the additional uncertainty around a possible rate rise is also being felt most acutely by them.”
As well as the 11 newcomers achieving five-crown ratings, 25 funds humped by two or more crowns for the top rating. Below, FE Trustnet explores the funds that have moved from a one crown rating to four or five crowns.
One crown-rated funds with the biggest upgrades
Several funds were upgraded during the latest rebalancing of the FE Crown ratings. Three funds were upgraded from one crown to five crowns, while three more moved to four crowns, as the below chart shows.
Source: FE Research
The best known of the funds upgraded to a five-crown rating is €2.7bn GAM Star Credit Opportunities managed by FE Alpha Manager Anthony Smouha and Gregoire Mivelaz. The high income-focused, fixed income fund saw its euro share class upgraded to the top ranking.
Elsewhere, the IA Strategic Bond sector’s Natixis Loomis Sayles Strategic Income and Norwegian asset manager Skagen’s m2 property fund saw similar rises.
Among the funds upgraded from one crown to four were the £3.7bn Pictet Global Megatrend Selection and the £149.2m SVM UK Growth funds.
The Pictet fund is managed by Hans Peter Portner, the Swiss asset manager’s head of thematic equities, and invests at least two-thirds of its assets in companies that can benefit from global megatrends.
Global megatrends are defined as “market trends resulting from sustainable and secular changes in economic and social factors”.
The SVM UK Growth fund, meanwhile, which is co-managed by FE Alpha Manager Margaret Lawson and Colin McLean, moved from a one crown rating to four crowns.
The pair target medium-to-long term capital growth from a portfolio of UK listed stocks with an objective of beating the FTSE All-Share index.
As well as a number of upgrades, the latest rebalance of the crown ratings saw 86 funds shed two or more crowns, while four funds went from having five FE Crowns to just one. Below, FE Trustnet considers some of the biggest downgrades from the latest rebalancing.
Top-rated funds with the biggest downgrades
The four funds with five-crown ratings downgraded to one crown included: Consistent Unit Trust, Fidelity Global Industrials, HC Charteris Gold & Precious Metals, and Standard Life Investments Enhanced Diversification Growth.
Source: FE Research
HC Charteris Gold & Precious Metals – managed by Ian Williams, Mark Williams and Nick Taylor – was last year’s best performing fund after returning 133.95 per cent during 2016. However, over three years to the end of June, the £13.3m fund has delivered just 5.94 per cent.
FE Alpha Manager Sean Ashfield’s Consistent Unit Trust was also downgraded from five crowns to a one-crown rating in the latest rebalance. The £12.8m fund returned 11.9 per cent over the past three years, compared with a 23.87 per cent for the FTSE All Share benchmark.
While Fidelity was tied for second place with the most top-rated funds, its Fidelity Global Industrials was not one of them following the latest rebalance. The fund, managed by Ashish Bhardwaj since 2015, has returned 28.5 per cent over three years compared with a 26.5 per cent rise in its composite benchmark and a 23.71 per cent gain for the average IA Global sector peer.
Lastly, the Standard Life Investments Enhanced Diversification Growth fund – which is overseen by the firm’s multi-asset team headed by Guy Sterns and is responsible for its flagship GARS fund – was also downgraded. Over three years the fund has returned 13.64 per cent compared with a 51.6 per cent rise in the MSCI AC World index benchmark.
Performance of funds over 3yrs
Source: FE Analytics
A further five funds also saw their four crown ratings cut to one crown, including: BlackRock GF Japan Small & MidCap Opportunities, Absolute Insight Equity Market Neutral, M&G North American Value, Pimco GIS Global Multi Asset, and Schroder ISF Global Equity Yield.