Next up we look at multi-asset funds, which have had a greater degree of flexibility to protect investors from the numerous crises of recent years compared with those that concentrate on just one asset class.
While these funds have a greater pool of resources to choose from, broadly speaking their greater exposure to "safer" assets such as bonds and property has seen them return less than higher-risk equity funds, which have managed to compensate for steep losses in the down markets of 2008 and 2011 with strong performance in 2009, 2010, 2012 and 2013.
Across the three Mixed Investment sectors and IMA Flexible Investment, none of the 480 funds have come close to doubling investors’ money, contrary to what was seen in previous studies.
The best-performing fund, Unicorn Mastertrust, has returned 65.22 per cent. The fund of investment trusts, headed up by Peter Walls, invests almost exclusively in equities, but is not a match for the top-performers across the IMA UK All Companies or IMA Global Emerging Markets sectors.
Top-15 best-performing multi-asset funds over 5yrs
| Name | 5yr returns (%) |
|---|---|
| Unicorn - Mastertrust | 64.82 |
| Henderson - Cirilium Moderate | 63.59 |
| CF Ruffer - Equity & General | 62.28 |
| Henderson - Cirilium Dynamic | 61.39 |
| SMT - Egerton Sterling Investment Investor | 60.98 |
| CF Ruffer - Total Return | 60.12 |
| Fidelity - Moneybuilder Balanced | 56.97 |
| MFM - Hathaway | 54.56 |
| McInroy & Wood - Balanced | 54.24 |
| Invesco Perp - Distribution | 54.2 |
| Ecclesiastical - Higher Income | 53.54 |
| Consistent - Practical | 52.4 |
| Kames - Ethical Cautious Managed | 52.36 |
| Baillie Gifford - Managed | 51.98 |
| McInroy & Wood - Income | 51.83 |
| IMA Mixed Investment 40%-85% Shrs TR in GB | 31.03 |
| IMA Flexible Investment TR in GB | 27.62 |
| IMA Mixed Investment 20%-60% Shrs TR in GB | 25.43 |
| IMA Mixed Investment 0%-35% Shrs TR in GB | 23.42 |
Source: FE Analytics
Our data shows that 15 multi-asset funds have managed to return more than 50 per cent over a five-year period. Among the highest profile of these are CF Ruffer Total Return and Fidelity Moneybuilder Balanced, though the vast majority are relatively unknown portfolios with less than £100m in assets under management (AUM).
There is no clear pattern that weds these funds. The 15 are relatively evenly spread across the IMA Mixed Investment 20%-60% Shares, Mixed Investment 40%-85% Shares and Flexible Investment sector, though none sit in the sector with the lowest maximum equity limit – IMA Mixed Investment 0%-35% Shares.
Some, such as Unicorn Mastertrust, have proven to be even more volatile than the FTSE All Share over the five-year period, and lost significantly more in late 2008 and the calendar year of 2011.
Others with a higher weighting to lower-risk assets such as bonds and property, including the CF Ruffer Total Return and Fidelity Moneybuilder Balanced funds, have been far less volatile, however. Our data shows that both of these have an annualised volatility over five years of around 9 per cent, compared with 16.79 per cent from the FTSE All Share and 18.5 per cent from the Unicorn Mastertrust.
The difference in the risk profiles of the funds is shown clearly in the graph below.
Performance of funds over 5yrs
Source: FE Analytics
CF Ruffer Total Return has been particularly successful, guiding its way through the various crises; unlike the vast majority of multi-asset funds, it managed to make money during the aftermath of the Lehmans crash, and was also largely unaffected by the eurozone sell-off in the summer of 2008.
While few experts would suggest anyone hold a multi-asset fund for less than three years, they are more suitable for investors with a shorter-term horizon compared with pure-equity funds. For this reason, those who hold them tend to place a greater emphasis on capital protection and stability.
A good way to grasp how much risk a fund has had to take on in order to deliver its returns is by looking at the Sharpe ratio – one of the most popular measures of risk-adjusted performance.
This ratio calculates a fund's return relative to a notional risk-free investment – in this case, cash. The difference in returns is then divided by the fund's volatility.
The top-15 changes dramatically when looking at risk-adjusted returns over the turbulent five-year period compared with just returns. Number-one on the list, Unicorn Mastertrust, drops out of the top-15 completely, as do funds like Investec Cautious Managed and Baillie Gifford Managed.
Conversely, the number-one on the list for risk-adjusted returns – FP Matterley Regular High Income, run by Chris Evans – didn’t make the top-15 for returns alone. The fund, which sits in the IMA Mixed Investment 0%-35% Shares sector, has returned 41.95 per cent over the last five years, with an annualised volatility of just 3.98 per cent. This equates to a Sharpe ratio of 0.94.
Evans invests predominantly in bonds and preference shares, with just 32 per cent in equities overall.
Top-15 multi asset funds for Sharpe ratio over 5yrs
| Name | Sharpe |
|---|---|
| FP - Matterley Regular High Income | 0.96 |
| CF Ruffer - Total Return |
0.82 |
| CF Ruffer - Equity & General | 0.78 |
| Henderson - Cirilium Moderate |
0.69 |
| Ecclesiastical - Higher Income | 0.67 |
| Henderson - Cirilium Balanced | 0.66 |
| Pru - Managed Defensive | 0.63 |
| Troy Trojan | 0.63 |
| Kames - Ethical Cautious Managed | 0.62 |
| Invesco Perp - Distribution | 0.61 |
| Fidelity - Moneybuilder Balanced |
0.6 |
| CF - Cautela | 0.59 |
| Henderson - Cirilium Dynamic | 0.55 |
| Scot Mut - Cautious | 0.53 |
| Newton - Managed Income | 0.52 |
| IMA Mixed Investment 40%-85% Shrs | 0.19 |
| IMA Mixed Investment 0%-35% Shrs | 0.18 |
| IMA Mixed Investment 20%-60% Shrs | 0.17 |
| IMA Flexible Investment |
0.13 |
Source: FE Analytics
Other strong performers when looking at Sharpe ratio include the two Ruffer funds as well as FE Alpha Manager Robin Hepworth’s Ecclesiastical Higher Income fund.
Looking at the max drawdown of the fund, which calculates what an investor would have lost if they bought and sold at the worst possible moments, is also a useful measure of risk.
Our data shows that the CF Ruffer Total Return and CF Ruffer Equity & General funds have the lowest max drawdowns, at 9.91 and 11.35 per cent, respectively. This compares with the All Share’s figure of just over 33 per cent.
Unsurprisingly, the Unicorn Mastertrust has the highest max drawdown of those in the top-15, at 35.57 per cent.
In other studies, FE Trustnet has looked at both open- and closed-ended funds, but the multi-asset model does not really lend itself to investment trusts.
One of the very few genuine multi-asset closed-ended funds is Capital Gearing IT, which is managed by industry stalwart Peter Spiller. With returns of 64.85 per cent, it has returned more than any multi-asset open-ended fund over five years.
Performance of trust and index over 5yrs
Source: FE Analytics
It has a Sharpe ratio of 0.56 over the period, which would put it in the top-15 of open-ended funds.
Spiller invests his trust in other investment trusts, as well as cash and bonds.
