Now in its 11th year, the FE Alpha Manager rating is now firmly established and highly coveted in the fund management industry. Unlike fund ratings, which are based on various performance criteria of the fund, the FE Alpha Manager Ratings rate the performance of a fund manager over their entire career including all funds they have managed, and places worked and helps fund selectors to take a step back and remove short-term market movements or cyclical factors from their analysis.
Specifically, the FE Alpha Managers make up the top 10 per cent of UK retail-facing managers based on their track record going back to the year 2000, with extra weighting for managers with the longest track records to highlight the benefits of experience. To determine the ratings, we look at a manager’s ability to create risk-adjusted alpha, outperformance in both rising and falling markets, and those who consistently beat their benchmarks.
Given the market conditions of recent years, partly down to ongoing Brexit uncertainty, it is fundamental that fund managers can add value over the very long term and ride the challenges the market throws at them. The Alpha Manager ratings give a strong indication of those managers that can and cannot do this.
This year’s rebalance revealed some interesting findings. Most notable was the turnaround of managers on the list. 54 managers made the list that did not last year. Of those 54 to join the list, there were 38 that had never previously been awarded an FE Alpha Manager rating. 52 managers also lost their Alpha Manager status.
Some of the standout managers to make the list for the first time this year are: Bryan Collins of Fidelity, Jack Barrat of Man GLG and James Elliot of JP Morgan Asset Management. All have achieved their Alpha Manager Rating as they have maintained a consistently high alpha score over a proven track record in rising and falling markets. All have outperformed the peer group more often than not and good stock picking has had a material positive impact on their results, which have tended to be similar in rising and falling markets.
We spoke to research manager at FE, Charles Younes to understand the key trends he has noticed from the changes to this year’s list: “The most prominent change I have noticed is among UK Equity managers. Managers such as Ben Russon of Franklin Templeton Investments, Henry Lowson of Royal London, Martin Turner at Miton and Chris St John at AXA Investment Managers all depart the list. We have also seen Chris Field, James de Uphaugh and Matthew Smith of Majedie Asset Management’s UK Equity desk join the shortlist.
“Within UK Equities, UK Smaller Companies managers have struggled. We believe that this is reflective of the underperformance of smaller companies compared to large caps since the Brexit vote. We have seen that managers with a preference for smaller companies have been finding it difficult to generate Alpha across the board.”
Jack Barrat’s name stands out from the list of new managers due to his investment strategy. Barrat has adopted the same successful investment strategy as Henry Dixon, who has made the list six times. Both Henry and Jack have designed an innovative value approach to UK equities, based on non-traditional valuation metrics. Data from Analytics shows just how effective their strategy has been. Over both the past one and three years both managers have significantly outperformed their respective groups.
What is clear is that it’s one thing to be awarded the FE Alpha Manager Rating but maintaining it over the long-term is difficult. This is evident when looking at some of the key statistics from the Alpha Manager 2019 rebalance. The fact that 52 managers have lost their Alpha Manager status from last year is a clear sign.
There are also only 16 returners to the list, once again showing how an FE Alpha Manager can find themselves on the list one year but if they don’t meet FE's stringent criteria each time around they can easily miss out the next time.
The 16 managers to return to the list in 2019
The standout points for asset managers should be that the prestigious FE fundinfo Alpha Manager Ratings are hard to achieve and even harder to maintain. However, the reward is more than just accolade. An Alpha Manager Rating can be hugely influential for fund selectors in helping them select which manager to choose when building a portfolio. We know already that, advisers use ratings as part of their investment process and as a way of deciding which funds they will invest in on behalf of their clients.
The achievements of this year’s FE fundinfo Alpha Managers will be celebrated on Thursday 16th May at the 2019 Alpha Manager of the Year awards.
For more information on the FE fundinfo Alpha Manager Rating, or any of our ratings, please contact us.