Thirteen new funds awarded highest 5-Crown rating

The IA Sterling Strategic Bond and IA Europe Including UK sectors have topped the sector charts in the latest Crowns Rebalance, which are awarded by leading global fund data and technology provider, FE fundinfo.

27 January 2020

The IA Sterling Strategic Bond and IA Europe Including UK sectors have topped the sector charts in the latest Crowns Rebalance, which are awarded by leading global fund data and technology provider, FE fundinfo.

Sterling Strategic Bond has maintained its position at the top since the last rebalance in July, with nearly a third of its 85 funds (31.8%) being awarded five Crowns, the highest rating available. The IA Europe Including UK sector meanwhile has seen 28.3% of its 46 funds awarded the same rating, more than double its total at the last rebalance.

Oliver Clarke-Williams, Portfolio Manager said: “Once again the Sterling Strategic Bond Sector has seen the highest number of its funds being awarded with five Crowns. During the last rebalance in July 2019, strategic bond managers had benefitted from their flexibility to invest across the fixed income spectrum, which appears to have continued into 2020. Added to this they have continued to generate returns with limited volatility compared with other sectors.”

Sector

Number of funds

Number of five Crown funds

% of five Crown funds

IA Sterling Strategic Bond

85

27

31.8%

IA Europe Including UK

46

13

28.3%

IA North American Smaller Companies

16

3

18.8%

IA UK All Companies

211

37

17.5%

IA UK Smaller Companies

48

8

16.7%

IA Asia Pacific Excluding Japan

96

14

14.6%

IA Asia Pacific Including Japan

7

1

14.3%

IA Short Term Money Market

7

1

14.3%

IA UK Gilts

21

3

14.3%

IA Flexible Investment

127

18

14.2%

Funds
Thirteen new funds have gained a five-Crown rating in the latest rebalance, bringing the total to up to 375. Among those gaining the coveted rating were funds from BlackRock, Capital Group, M&G UK and Tideway Investment Partners LLP. True Potential Investments meanwhile saw four of its funds from the Mixed Investments universe receive the accolade (SVS TPI Aggressive 6; SVS TPI Balanced 6; SVS TPI Cautious 6 and SVS TPI Growth 6). To qualify for a Crown Rating, funds must have three years of performance history to be analysed.

Tanvi Kandlur, Senior Fund Analyst said: “Capital Group New World was one of the biggest risers. It takes a domicile agnostic approach to emerging markets, investing not only in companies domiciled in emerging markets, but also in well-established developed market businesses with significant revenue exposure to emerging markets. The fund’s developed market exposure has helped the fund navigate difficult periods, whilst retaining upside from the pure emerging market allocation.”

Louis Tambe, Fund Analyst said: “The M&G Absolute Return Bond Fund is a flexible fixed income fund that has recently reached it’s 3-year track record. It’s good performance has mainly been driven by its opportunistic credit stock picking, whilst ensuring drawdowns remained limited by diversifying and tactically hedging the portfolio.”

Eleven funds also saw substantial improvements in this rebalance, gaining five Crowns, from only one last year. These were: ASI Global Opportunistic Bond; Barclays Global Access Global Corporate Bond; New Capital Wealthy Nations Bond; Fidelity Strategic Bond; GS Global Credit Portfolio (Hedged); MFS Meridian Emerging Markets Debt Local Currency; Nomura Diversified Growth; Quilter Investors Sterling Diversified Bond; RWC Nissay Japan Focus; Schroder ISF EURO Corporate Bond and Scottish Widows Corporate Bond 1.

Tanvi Kandlur added: “RWC Nissay Japan Focus has a clear bias to growth. This was in favour in 2019, where it delivered strong outperformance relative to Japanese markets consistently throughout the year.”

Amy Kennedy, Fund Analyst said: “Edentree Amity UK and BNY Mellon UK Income were significant risers in this rebalance, both moving from one to four Crowns. Edentree is responsibly managed and has a natural bias towards smaller companies, with over half of the portfolio being invested in small- and mid-caps. Following the election in December, UK smaller companies enjoyed a strong rally, which contributed to the fund’s strong performance.

“BNY Mellon meanwhile has a balanced growth approach that was out of favour in the latter half of 2016 and contributed to the fund’s underperformance over that period. The fund’s recent outperformance following the UK election has contributed to improved three-year alpha, and thus a higher crown rating.”

Groups
Across the groups, Liontrust saw the highest number of its funds awarded with five Crowns totalling 13. This represents nearly 30% of its total funds being awarded the highest accolade. Following Liontrust were T. Rowe Price and Royal London, both with 12 of their funds being awarded five Crowns (representing 30.76% and 20.33% of their respective 39 and 59 funds) and then Aberdeen Fund Managers with 11 funds (11.57% of its 95 funds).

Tanvi Kandlur said: “While Liontrust has performed well again at a group level with the highest number of funds rated with five Crowns, their proportion has actually fallen. This is following the acquisition of Neptune where Neptune’s fund range have now been fully integrated under the Liontrust range.”

Group

Number of funds

Number of five Crown funds

% of five Crown funds

Liontrust

44

13

29.55%

T. Rowe Price

39

12

30.77%

Royal London Asset Management

59

12

20.34%

Fidelity International

91

11

12.09%

Aberdeen Standard Investors

95

11

11.58%

Janus Henderson Investors

71

10

14.08%

Sarasin

31

9

29.03%

MFS Investment Management

34

9

26.47%

GAM

49

9

18.37%

BlackRock

124

9

7.26%

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, Research Manager, said: “The Crown ratings are applied to funds with a three-year history and there is no cost associated with this service. Quantitative ratings play an important role in supporting accurate and fair comparisons of historic, but not future performance. We aim to make the market more transparent for people to make better investment decisions.”