Managed portfolio service provider FE Investments has given eight new funds a ‘buy’ rating while removing two from its latest Approved List review.
Funds from the Alternative Assets (1), Global Equities (1), Other Developed Equity (3), UK Equity (1) and UK Fixed Income (2) asset classes have all been brought in, while funds in the Commodity & Energy (1) and UK Fixed Income (1) asset classes have been removed in the latest rebalance.
JPM Global Macro Sustainable (Alternative Assets), which incorporates ESG risks and opportunities using screening, while investing in companies with above average ESG scores has been given a ‘buy’ rating, as have Baillie Gifford Global Stewardship (Global Equity) and Comgest Growth Japan (Other Developed Equity) both of which met FE Investments’ strict criteria of performance and risk-adjusted returns. Other funds to be added include Baillie Gifford European, Premier Miton European Opportunities, Slater Growth, L&G Fixed Interest Trust and Royal London Global Bond Opportunities.
Charles Younes, Research Manager at FE Investments, said:
“We have been impressed by Baillie Gifford’s Global Stewardship fund, not only in terms of performance, but how they are factoring in ESG principles into their decision-making. Any company that generates more than 10% of its revenues from a proscribed list of industries is excluded, while positive screening is also used, ensuring only companies that make a positive contribution to society are eligible for inclusion. The team is well-balanced too, with six regional managers and three sustainability analysts contributing to stock selection. It is also competitively priced among its peers with an OCF of 0.53%. Comgest Growth Japan’s performance meanwhile, has certainly been impressive as well. Not only is the fund run by three FE fundinfo Alpha Managers, it has a good history of offering downside protection, while having in place a strong ESG process which analyses the risk of any potential investments.”
With global markets still showing signs of uncertainty during the ongoing coronavirus pandemic, both Ninety One Enhanced Natural Resources and Man GLG Strategic Bond have however both been removed from the Approved List, for strategic and performance-related reasons.
Charles Younes said:
“While it has performed in line with expectations, the Ninety One fund has unfortunately seen a steady decline in AUM and owing to that, has been merged with the corresponding Global Environment fund. Although this fund has the same objective, the approach is very different and has a different management team, so the decision was taken to remove, rather than replace.
“With regards to Man GLG’s fund, the long-term track record is good, but recent performance has not been in line with expectations. The fund was caught on the wrong side of the market sell-off in 2020 after it removed all its hedging just before the Covid-19 pandemic hit markets. The manager then took a very defensive approach and so failed to benefit from the subsequent recovery. Since the sell-off the fund has also shown signs of style drift and its recent use of credit default swaps to hedge credit risk has been unsuccessful.”
Despite the ongoing volatility in the markets, the latest additions and withdrawals to FE Investments’ Approved List do not represent any significant strategic shift, demonstrating the effectiveness of the MPS provider’s risk-targeted approach.
Charles Younes said:
“Our portfolios have performed as hoped during the recent periods of downturn and recovery, so we see no need to deviate from our current strategy, which is to provide investors with risk-adjusted returns, based on an investment’s ability to perform in a wide range of scenarios and not just short-term success. Our approach in leveraging data and utilising ratings alongside our qualitative analysis has helped deliver both diversification and good returns, which has helped increase our assets under management to £3.9 billion.”