These are exactly the types of investors who are most likely to be nearing retirement or retired and drawing an income.
The bond market seems to be creaking after 30 years of positive returns, with yields starting to rise and prices starting to fall. On top of this, the correlation of bond and equity markets is particularly alarming, as being in the former is no longer effective as a hedge against falls in the latter.
Data from FE Analytics shows clearly that the major sell offs in equities this year have been accompanied by bond market sell-offs too.
Performance of indices over 1yr
Source: FE Analytics
Here we look at the mixed asset funds that have managed to minimise this volatility while producing healthy returns, searching for those retail funds that have produced top-quartile gains with top-quartile stability.
There is no guarantee that past performance will be repeated, of course, and one year is a reasonably short time frame.
However, with many analysts predicting that the sort of correlated markets we have seen over the past few months will continue, it will be interesting to see if these funds continue to excel.
IMA Flexible Investment
The standout fund in this sector has been the £8.7m Unicorn Mastertrust, managed by Peter Walls.
Investment trusts are usually thought of as volatile, but Walls’ portfolio, which has five FE Crowns, is in the top quartile of its sector for stability over the past year – 17th out of 186 – while producing the fourth-best returns.
In terms of the Sharpe ratio – which measures the returns gained for each notional unit of risk – it is first.
Data from FE Analytics shows it has made 29.28 per cent over the past 12 months while the sector average is just 13.01 per cent.
Walls will have been helped by the general narrowing of discounts across the board in a rising market, but the fund’s solid performance when equities sold off in June is notable – it lost less than the sector average.
Performance of funds vs sector average over 1yr
Source: FE Analytics
The fund is also top quartile in terms of volatility over three years.
CF Ruffer Equity & General, managed by FE Alpha Manager Alex Grispos, has the next best volatility score of any fund with top-quartile returns over the period, namely 5.99 per cent. The fund has made just 17.83 per cent over the past year, however.
Two tiny TB Wise funds appear next on the list in terms of volatility, the £29.5m TB Wise Income fund being marginally less volatile than the £32.9m TB Wise Investment fund, although also making marginally less money – 23.23 per cent to 23.67 per cent.
The other two funds of the five to qualify are members of fund ranges which also appear in other sectors on this list.
Paul Craig’s £253m Henderson Cirilium Dynamic is one of two funds in the range to qualify, having made 20.64 per cent with a volatility of just 6.99 per cent.
Cazenove Multi Manager Diversity Tactical is one of three funds from the Cazenove Multi Manager team, run by Marcus Brookes and Robin McDonald, to qualify.
IMA Mixed Investment 40%-85% Shares
Funds in this sector are much less likely to have combined low volatility with high returns, with only three out of the 279 funds it contains passing both tests.
Craig’s Henderson £499m Cirilium Moderate does, with returns of 18.39 per cent and volatility of just 6.57 per cent.
Performance of funds vs sector average over 1yr
Source: FE Analytics
The £14.4m PFS Hawksmoor Distribution fund also qualifies, with a one-year volatility score of 6.16 per cent and returns of 19.96 per cent.
The third fund is Premier Multi Asset Income and Growth, one of the three funds from David Hambidge’s range to appear across the four sectors. Both of the others have made marginally more than 21 per cent in the year.
IMA Mixed Investment 20%-60% Shares
Eight funds are top quartile for both returns and volatility in this sector. Craig’s Henderson Cirilium Strategic Income appears in the list, as do two funds run by Brookes and McDonald – Cazenove Diversity Income and Cazenove Multi Manager Diversity.
Premier Multi Asset Distribution and Premier Multi Asset Monthly Income, both run by Hambidge and both with five FE crowns, also appear.
The £724m F&C MM Navigator Distribution, run by Gary Potter and Robert Burdett, also makes an appearance.
The fund has made 12.75 per cent over the past year in total return terms. This is less than the £2.4bn Invesco Perpetual Distribution fund, managed by FE Alpha Managers Paul Causer, Neil Woodford and by Paul Read. The five FE-crown rated portfolio has made 15.97 per cent over the year.
At the other end of the scale, but also with five FE crowns, is the £34.5m MGTS Future Money Income fund.
IMA Mixed Investment 0%-35% Shares
Only three funds made the cut in this sector, with the standout performer being the £46m Henderson Multi-Manager Diversified fund.
The five crown-rated fund of funds has produced the best returns in the sector, of 11.94 per cent, while it has the fourth-lowest volatility score out of 37 funds.
Performance of funds vs sector average over 1yr
Source: FE Analytics
The £56m Fidelity Multi Asset Income fund, which also has five FE Crowns, has produced the 10th-best returns and 10th-lowest volatility.
The £9.6m IFSL Brooks Macdonald Defensive Income fund also qualifies, with the third best returns and ninth-lowest volatility score.
