While some of the funds the advisers are well known to most investors, others are more niche or specialist products that do something different compared with the majority of their peers.
Here FE Trustnet looks at some of the funds the advisers rate highly. You can find more information about the indices here.
Schroder Income Maximiser
The AFI panel uses Schroder Income Maximiser in the Balanced and Cautious portfolios. This is one of the top yielders in the sector, currently paying out 6.99 per cent, according to FE Analytics.
The £1.01bn portfolio generates this income through the use of derivatives, namely writing call options on stocks it holds.
This means that if the stocks rise in value above a certain point, the managers may have to sell them for less than their market value, limiting the capital gains they can achieve.
On the other hand, they receive a fee from the purchaser of the option which they pocket and pay out to investors as income.
It is a fund for investors that need income, therefore, and in total return terms has marginally underperformed the sector average, with three-year returns of 35.15 per cent to the IMA sector’s 37.8 per cent.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The fund has been managed by Thomas See since April 2009.
It has ongoing charges of 1.66 per cent.
Liontrust Macro Equity Income
The £315m Liontrust Macro Equity Income fund has been run by FE Alpha Managers Jan Luthman and Stephen Bailey since it was launched in 2003. It is a selection on the AFI Balanced and Cautious portfolios.
The duo analyse macro-economic themes to help them select companies. They look at how developments in politics and society interact with economic factors to create opportunities and threats for different companies and sectors.
There are few funds that are so openly run on such lines, and Luthman and Bailey are probably the best-known of the managers to operate in this way.
The strategy has served them extremely well over the longer run, and the fund has the fourth-best returns in the sector over 10 years. It has made 190.37 per cent compared with 125.56 per cent from the average IMA UK Equity Income fund.
Performance of fund vs sector over 10yrs
Source: FE Analytics
The fund is also top quartile over five years, having recorded the tenth-best returns of 71 funds in the sector.
The fund has had a tougher time recently and it is marginally behind the sector average over three years.
This is largely due to a very poor 2012 when the fund made 6.28 per cent compared with 14.01 per cent from the sector. This year has been much better already, and the fund has again outperformed.
Recently Luthman told FE Trustnet that the pair were shifting out of emerging markets-focused companies.
The fund has ongoing charges of 1.6 per cent.
Cazenove UK Equity Income
The £497m Cazenove UK Equity Income fund, managed by Matt Hudson, has five FE Crowns. It is included in both the AFI Balanced and Cautious portfolios.
Hudson uses Cazenove’s business cycle approach, the same strategy used by Julie Dean on the hugely popular Cazenove UK Opportunities fund.
This amounts to shifting money into sectors and stocks that the manager and his team think are about to outperform.
The fund currently has a huge overweight to the consumer services sector and is also overweight industrials. It is significantly underweight basic materials, consumer goods, utilities and oil and gas companies.
The fund’s largest position is in BP, worth 5.12 per cent of the fund. Glaxo, BAT and Vodafone are the next biggest holdings while the manager also holds Rio Tinto and Tesco in his top-10.
The fund is currently yielding 3.4 per cent, putting it in the lowest quartile of the sector. However, it is top quartile in total return terms over one, three and five years. Ongoing charges are 1.56 per cent.
Premier Income
For cautious investors, the AFI panel also likes the £350m Premier Income fund, managed by Chris White since December 2010.
White steered the fund to one of the best results in the sector in 2011 when markets finished down. Whereas the average UK Equity Income fund lost 2.9 per cent, it made 1.55 per cent.
Overall, volatility is around the sector average, in the second quartile.
Data from FE Analytics shows that while the average IMA UK Equity Income fund has made 37.8 per cent over three years, Premier Income has made 40.55 per cent. This puts it in the second quartile.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund’s yield of 4.36 per cent puts it in the top quartile of it sector.
It is managed with growth at a reasonable price, value and special situations strategies in mind.
Royal London UK Equity Income
Martin Cholwill’s £535m Royal London UK Equity Income fund invests heavily in the mid cap area of the market, which makes it a good complement to the typical large cap heavy equity income portfolio.
Being in mid caps has helped the fund in recent years as the FTSE 250 has performed exceptionally well.
Cholwill’s portfolio has actually marginally outperformed that index as well as his peers in the sector over the past three years.
Data from FE Analytics shows that the fund has made 56.3 per cent while the index has made 51.1 per cent.
Performance of fund vs sector and indices over 3yrs
Source: FE Analytics
Ongoing charges are 1.29 per cent.
