AXA World Funds Framlington UK, Liontrust UK Micro Cap and Unicorn UK Ethical Income are among seven funds that have been awarded a five FE Crown rating after becoming eligible for the first time.
The FE Crown ratings were rebalanced at the end of last month, with 377 funds from the Investment Association universe awarded the top rating.
The ‘crown score’ is calculated based on three-parts: an alpha test, a volatility score and a consistency score.
Following the latest rebalance 377 funds were awarded five FE Crowns, making up the top 10 per cent of funds. The next 15 per cent receive four FE Crowns, with the following 25 per cent of funds awarded three FE Crowns, the next 25 per cent gain two FE Crowns and the bottom 25 per cent are awarded one.
With each fund requiring a minimum of three years performance before being awarded an FE Crown rating, a new raft of funds becomes eligible at each rebalance.
Newcomers with a five-crown rating
Source: FE Analytics
As such there were seven new funds awarded a maximum of five FE Crowns following the latest rebalance. Below we take a closer look at the new top-rated funds.
AXA World Funds Framlington UK
The first fund is the £222.9m AXA World Funds Framlington UK fund, overseen by lead manager Chris St John and deputy manager John King. The UK equities fund invests across market capitalisation spectrum with the aim of delivering long-term growth.
Launched on 2 March 2016, the fund has made a total return of 39.32 per cent to 31 July, in line with the FTSE All Share’s 39.85 per cent and ahead of the 32.54 per cent gain for the average IA UK All Companies peer.
The fund has an ongoing charges figure (OCF) of 1.01 per cent.
Unicorn UK Ethical Income
Another newcomer garnering five FE Crowns at the first attempt is Unicorn UK Ethical Income and co-managed by FE Alpha Manager Fraser Mackersie and colleague Simon Moon.
Launched on 1 May 2016, the UK equity income fund targets a historic yield in excess of 110 per cent of the FTSE All Share over at three-year period.
The managers invest in UK companies that meet ethical guidelines subject to thorough company analysis and with each holding’s ethical and socially responsible criteria reviewed at investment and quarterly thereafter.
Since launch the fund has made a total return of 22.86 per cent against a 38.96 per cent for the FTSE All Share benchmark and a 24.86 per cent rise for the average IA UK Equity Income peer.
Performance of fund vs sector & benchmark since launch
Source: FE Analytics
“Having recently reached its three-year mark, Unicorn UK Ethical Income, like the unconstrained version, has benefitted from excellent stock selection by the team despite the headwinds that UK smaller companies have faced since 2016,” said Amy Kennedy, fund analyst at FE.
The pair are growth investors albeit with a process that also combines some value disciplines.
The Unicorn UK Ethical Income has a yield of 4.72 per cent and has an OCF of 0.81 per cent.
BlackRock Sterling Strategic Bond
Next up is the £124.2m BlackRock Sterling Strategic Bond fund, co-managed by FE Alpha Manager Ben Edwards and Simon Blundell.
The fixed income fund invests mainly in sterling-denominated, non-government, investment grade bonds, targeting income returns with the prospect capital growth.
Since launch it has made a total return of 19.60 per cent against the average IA Sterling Strategic Bond peer’s 15.50 per cent.
It has a yield of 2.21 per cent and runs an OCF of 0.62 per cent.
VT Sorbus Vector
Another IA UK All Companies constituent was also awarded the top rating at the latest rebalance: VT Sorbus Vector.
The £32.3m was launched in April 2016 and aims to generate income and capital growth through investment in a concentrated portfolio of UK equities, many of which are likely to be lower down the market cap scale.
VT Sorbus Vector is overseen by Max Thowless-Reeves and Richard Familoe who take an active, high conviction strategy, trading infrequently and seeking out deep value companies.
Since launch the fund has made a total return of 48.25 per cent compared with a 29.15 per cent gain for the average peer. It has an OCF of 1.18 per cent.
Liontrust UK Micro Cap
The only UK small cap fund on the list is the £51.1m Liontrust UK Micro Cap, managed by the ‘Economic Advantage’ team made up of FE Alpha Manager duo Anthony Cross and Julian Fosh, with colleagues Matthew Tong and Victoria Stevens.
Liontrust’s proprietary ‘Economic Advantage’ process seeks to identify the companies with a durable competitive advantage that allows them to defy industry competition and sustain a higher than average level of profitability for longer than expected.
“As the fund reached its three-year mark, the team at Liontrust continue to demonstrate their excellent ability to select stocks despite the headwinds UK smaller-caps have faced since 2016,” said FE’s Kennedy.
“The team’s preference for technology companies as well as their growth style has helped too as both have been in favour over recent years”.
Performance of fund vs sector since launch
Source: FE Analytics
Since launch in March 2016, Liontrust UK Micro Cap has made a total return of 60.70 per cent compared with a 42.77 per cent gain for the average IA UK Smaller Companies peer. It has an OCF of 1.41 per cent.
Vanguard Global Balanced & Vanguard Global Emerging Markets
Finally, on our list of top-rated newcomers are two funds from Vanguard Asset Management, best known for its range of passive strategies. However, these two newcomers are actively-managed funds.
The £83.1m Vanguard Global Balanced, advised by US asset manager Wellington Management Company, invests in multi-asset portfolio with the aim of delivering long-term capital growth and some current income. Around two-thirds of the portfolio are invested in equities, while the remaining third is invested in fixed income securities.
Since launch in May 2016, it has made a total return of 43.96 per cent compared with a 33.16 per cent gain for the average IA Mixed Investment 40-85% Shares peer. It has an OCF of 0.48 per cent.
The £75.7m Vanguard Global Emerging Markets fund, meanwhile, is advised by three different firms, with three different strategies. Baillie Gifford employs a growth approach to emerging markets with a five-to-10 year investment horizon, Pzena Investment Management meanwhile takes a value approach, and Oaktree Capital Management takes a more special situations approach to investing.
Vanguard Global Emerging Markets has made a total return of 82.95 per cent since launch in May 2016, compared with a gain of 71.64 per cent for the FTSE Emerging index and a return of 64.11 per cent for the IA Global Emerging Markets sector. The fund has an OCF of 0.78 per cent.