Market rotations see seven funds gain 5-Crown rating at the first time of asking

With economies reopening after the Covid-19 pandemic, find out which funds have been awarded a 5-Crown rating by our team of fund experts

24 January 2022

Seven funds have gained the highest 5-Crown rating at the first time of asking in the latest rebalance of the Crown Ratings, which are published today by global fund data and technology leader, FE fundinfo.

As the global economy emerges into a post-pandemic landscape and markets rotate away from the tech stocks that boomed during Covid-19, funds with a broad range of strategies have joined the latest list of the best performers.

These funds were: EFG Asset Management’s New Capital Global Balanced fund, Legal & General’s L&G Future World Sustainable Opportunities, Ninety One’s UK Sustainable Equity fund, Octopus Investments’ FP Octopus UK Multi Cap Income fund, Omnis Investments’ Asia Pacific ex-Japan Equity fund, PGIM Funds’ European Corporate ESG Bond fund and the S&W Samphire fund, managed by Authorised Corporate Director (ACD) S&W Fund Administration.

Charles Younes, Research Manager at FE Investments, commented:

“There have been a number of different pressures affecting the markets throughout the second half of last year, which will run into 2022. The impacts of Covid have still been playing out within the economy, as those stocks that soared and those that fell were still being impacted by government policy and the tightening and loosening of restrictions. Additionally, rising inflation and interest rates have had a knock-on effect on the markets in the last quarter, which has led to a rotation between the popularity of income and growth funds. Therefore, it’s not surprising that a broad range of funds and strategies, not concentrated in any one area, have gained a 5-Crown rating during this rebalance.”

5-Crown rated funds and large changes

Overall, 127 funds gained the 5-Crown rating during this latest rebalance, bringing the total number to 406. To qualify for the highest rating, funds must be in the top 10% of ‘Crown Scores’, which are calculated in three parts, each referenced to a benchmark. Funds must also have a three-year history to qualify.

Four funds, BNY Mellon’s Inflation Linked Corporate Bond fund, Fidante Partners Europe’s Fidante Whitehelm Capital Low Carbon Core Infrastructure fund, Pictet Asset Management’s Global Sustainable Credit fund and PIMCO Global Advisors’ Global Low Duration Real Return, all moved from the lowest 1-Crown rating to the highest 5-Crown rating.

Meanwhile the impact of the market rotation over the past year has also seen 132 funds losing their 5-Crown rating during this rebalance. Among those falling from the highest rating to the lowest were AXA Investment Managers’ World Funds Asian Short Duration Bonds fund, Ninety One’s Global Macro Allocated fund, PIMCO’s GIS Dynamic Bond fund and S&W Fund Administration’s S&W Daisybelle fund, who were affected by this shift.

Sectors and groups

The latest rebalance was the first to capture data from the eight new sectors launched by the Investment Association last year. Two of these sectors saw the highest percentage of their funds gaining a 5-Crown rating, with the IA Infrastructure sector coming out on top, with 50% of its 18 funds gaining the rating, followed by the IA Financials and Financial Innovation sector, with 4 of its 11 funds (36.4%) awarded 5-Crowns.

Overall it has been a good year for infrastructure focused funds and for cyclicals like the financial sector. The reorganisation of the IA sectors provides a more granular level for investors to gauge performance. Where before these high-performing funds were grouped with a wide range of funds with strategies and structures, their performance may have gone unnoticed, but now are able to demonstrate their value.

Charles Younes, Research Manager

Across the different groups meanwhile, abrdn once again had the highest number of 5-Crown rated funds within its stable at 17, followed by BlackRock and Liontrust with 16 and 12 respectively. Falling out of the top ten meanwhile were Baillie Gifford, whose stable of 5-Crown rated funds fell from 9 last year to 4 this year.

Charles Younes added:

“Within the groups, Baillie Gifford has gained a lot of attention in recent months, having gone through a period of underperformance, after a highly-successful 2020. But once again, this is largely due to market shifts, rather than any fundamental changes within management style, or the holdings they typically own as a group. We remain confident in their approach, which has been consistent throughout and many of the companies they have invested in continue to grow. We haven’t seen any evidence of poor choices in their stock picking so are anticipating stronger performance in the next Crown rebalance in July.”

Group

#of funds

#of five Crown funds

% of five Crown funds*

abrdn

142

17

12%

BlackRock

103

16

16%

Liontrust

55

12

22%

GAM

42

10

24%

PIMCO

40

9

23%

Fidelity

92

9

11%

Baring

27

8

30%

Goldman Sachs

44

8

19%

JP Morgan

60

8

14%

Valu-Trac

76

8

10%

         

 

*Percentages have been rounded up to the next whole number

Methodology

FE fundinfo Crown ratings are calculated by building up a ‘Crown Score’. The score is made up of three parts, and each part is calculated by reference to a benchmark for the fund. Once the benchmark is assigned, FE fundinfo then applies three tests (an alpha based test, a volatility score and a consistency score) to the total return history of the fund. Three years of history is required to carry out these scores, so any fund with less history than this will not qualify for a rating.

Funds are assigned ratings based on their total scores, according to the following distribution:

  • the top 10% - 5 FE fundinfo Crowns
  • the next 15% - 4 FE fundinfo Crowns
  • the next 25% - 3 FE fundinfo Crowns
  • the next 25% - 2 FE fundinfo Crowns
  • the bottom 25% - 1 FE fundinfo Crown

Charles Younes added:

Crown ratings offer investors an opportunity to compare and contrast the performance of a fund over an extended period of time and throughout different market conditions. Over the past year, as the pandemic, rising inflation and an increase to interest rates have caused uncertainty in the markets, the Crown ratings provide a transparent and in-depth quantitative analysis of the global funds market.”