As so often has been the case recently, interest rates have been the major talking point of the week. 
Following some decidedly hawkish comments from the US Federal Reserve last week, market attention turned to the Bank of England’s Monetary Policy Committee meeting which was dubbed ‘Super Thursday’ by parts of the press.
In reality, the meeting turned out to be somewhat of a damp squib with Carney and co keeping rates at their rock-bottom levels due to a lack of underlying inflation.
The announcement led gilt yields to fall again, sterling then weakened and equity markets bounced around – mainly as now investors will turn their attention to today’s US jobs data.
Turning away from markets, though, and it has been a cracking week for FE Trustnet with the editorial team scooping two Investment Association Awards.
Held at the Grosvenor House Hotel on Wednesday night, the team picked up the Investment Writing Team of the Year 2015 award while news editor Alex Paget was named Trade Journalist of the Year. Again, thank you for all your support.
So, as we are all feeling very happy for ourselves (not to mention slightly jaded), here we run through our favourite articles over the past seven days.
From everyone here at FE Trustnet, have a lovely weekend.
The best multi asset income funds for dividends and dividend growth
We start with one of our studies, which was put together by Paget.
Given there has been a surge in popularity in multi asset income funds over recent times with swathes of fund groups launching portfolios into the space over the past five years or so, he looked at which funds have paid out the most in terms of total dividends over the past five years and which have been able to increase their pay-out in every calendar since 2010.
In the study, he looked at all the funds in the IA Mixed Investment 0%-35% Shares, IA Mixed Investment 20%-60% Shares and IA Mixed Investment 40%-85% Shares sectors which have a long enough track record
Source: FE Analytics
As the table above shows, the fund which tops the list is F&C MM Navigator Distribution which carries five FE Crowns and is headed up by the experienced duo of Gary Potter and Rob Burdett.
According to FE Analytics, investors who bought £10,000 worth of units in the fund in January 2010 would have gone on to earn £3,134.26 in income by the start of 2015 – which is some £1,755.71 more than its sector average.
However, the only one to have increased its dividend in every year on the list is the five crown-rated Premier Multi Asset Distribution fund.
Don’t think the UK small and mid-cap run is over yet, say FE Alpha Managers
This week we heard from Neptune’s Mark Martin and Franklin Templeton’s Paul Spencer, who argued that the outperformance of small and mid-caps looks like it could continue for some time.
Small and mid-caps have seen some rapid growth over recent years and managed to hold up very well during the summer’s China-induced volatility, which mainly affected the international-facing FTSE 100. This has led some to suggest that profit-taking might be in order.
However, Martin said: “While there are a number of optically cheap companies at the higher end of the market, the FTSE 100 has far greater dependence on emerging markets and higher oil prices, both of which I’m currently wary of having too much exposure to.”
Instead, the manager is overweight the smaller end of the UK market – especially small-caps, which he sees are offering investors “the best value overall” as many companies are trading at a “marked discount” to the rest of the market.
Spencer agrees that areas outside of the FTSE 100 still look attractive in spite of their strong run over recent years. He particularly favours UK mid-caps.
“The range of industries and exposures offered by mid-cap companies persuades us that this remains an attractive place to hunt out bargains, particularly at the moment,” he said.
AXA Framlington Managed Balanced: Buy, hold or fold after manager shuffle?
This week saw AXA Investment Managers announce that Richard Peirson will hand over responsibility for the UK equity and bond elements of the £1bn AXA Framlington Managed Balanced fund to other managers.
While the highly respected manager will continue to oversee the portfolio’s overall asset allocation, the shuffle did lead to the fund being downgraded by some analysts and it was removed from Hargreaves Lansdown’s Wealth 150. This prompted senior reporter Daniel Lanyon to ask the experts what investors should do from here.
Performance of fund vs sector over 10yrs
Source: FE Analytics
Meera Hearnden, fund analyst at Parmenion, remains positive on the fund and says she has confidence in Jamie Hooper, who has been promoted as the fund’s co-lead manager and been handed control of its UK equities.
“This hardly comes as a surprise as it was bound to happen at some point. That is why they already had succession planning in place over the last few years with Jamie Hooper. He has been doing well on his own right so he is clearly the right man for the job,” she said.
Take another look at the story to see what the commentators thought of the changes.
Investors lose faith in bond fund managers
On Wednesday, reporter Lauren Mason took a look at research published by NN Investment Partners which found that only 3 per cent of institutional investors had complete faith in fixed income managers’ ability to cope with impending rate hikes.
The research also found that, out of those who had little or no confidence in fixed income managers, half of them said this was due to few managers having dealt with the end of a credit cycle before, while 17 per cent said a lack of experience in rate rises was more concerning.
Speaking to a further panel of investment professionals, it transpired that they shared a similar sentiment, with Informed Choice’s Martin Bamford pointing out that markets have been driven by quantitative easing, and few managers have experience of a rising rate cycle.
“I have little confidence in the ability of most fixed income managers to accurately call the timing of a rate rise. Many have consistently failed to get this right over the past two or three years, with expectations of a rate rise here and in the US continually pushed back,” he said.
In a later article, FE Trustnet looked at the five fixed income funds the professionals are backing to be able to navigate the challenging market conditions that lay ahead.
How Fundsmith Equity has outperformed in every year since launch
FE Alpha Manager Terry Smith’s Fundsmith Equity fund celebrated its fifth anniversary this week and did so in style – it has outperformed the average IA Global fund in every one of the five years since launch and its MSCI World benchmark in four of these. In total it has made 113.43 per cent over this time, compared with 40.31 per cent from its sector and 61.86 per cent from the index.
So what is the secret to delivering such spectacular outperformance in the volatile markets that have followed the financial crisis? Smith says it is simply a case of picking good companies.
“I remain constantly amazed at the number of people who talk about investment and spend most or all of their time talking about asset allocation, regional allocation, sector weightings, economic forecasts, bonds vs equities, interest rates, currencies, risk controls and never mention any need to invest in something good,” he explained.
Smith said he has the same strategy now as when he launched the fund five years ago.
“Through rigorous analysis and iron discipline, we only buy shares in good companies, try not to over-pay and then do nothing,” he said.
“We have made a good start; however, our investment time horizon is indefinite. We will not waiver from this no-nonsense approach and strive to deliver long-term outperformance.”
