The sustainable multi-asset range run by Royal London Asset Management generated strong returns in 2017 as did offerings such as JPM Global Macro Balanced, Premier Diversified and Neptune Global Alpha, research by FE Trustnet shows.
Multi-asset funds have grown increasingly popular over the past decade as advisers and private investors seek to outsource their investment decisions to fund managers with a remit to allocate across asset classes.
Looking at the performance of the Investment Association’s four multi-asset sectors in 2017 shows that the average IA Flexible Investment fund came out on top with an 11.19 per cent return. In the context of the entire Investment Association universe, this meant the sector was ranked 15th out of 38 peer groups.
Performance of multi-asset sectors in 2017
Source: FE Analytics
Given last year was a relatively strong one for equities and a more lacklustre one for bonds, it’s no surprise to see that the sectors with the highest allocations to stocks outperformed those with more in fixed income assets.
In this article, we look inside each of the four sectors to find out which multi-asset funds posted the highest total returns of 2017.
IA Mixed Investment 0-35% Shares
As the chart above shows, the average fund in the IA Mixed Investment 0-35% Shares sector posted a 4.84 per cent total return across the course of 2017, ranking it in 31st place of the Investment Association’s 38 peer groups.
JPM Global Macro Balanced, which is managed by Talib Sheikh, Gareth Witcomb and James Elliot, was the best performer of the sector after making a 9.70 per cent return in 2017. While the fund was in the fourth quartile in 2016, it was top quartile in each of the previous two years and, as such, is the peer group’s fifth highest returner on a five-year view.
The £146.9m fund aims to outperform a benchmark that is 70 per cent weighted to the JP Morgan GBI Global index and 30 per cent to the MSCI World index. According to its latest factsheet, 55.6 per cent of the portfolio is held in bonds with 34.8 per cent in equities and 9.6 per cent in cash.
Source: FE Analytics
Richard Nelson’s £107.2m Royal London Sustainable Managed Growth Trust, which made the second highest return last year, is the IA Mixed Investment 0-35% Shares sector’s best performer over the five years to the end of 2017. It uses both negative and positive screening to find industry leaders in environmental, social and governance performance, avoiding industries such as tobacco, armaments and other non-ethical areas.
The worst performer from the peer group was City Financial Multi Asset Diversified, which made a 0.13 per cent loss in 2017.
IA Mixed Investment 20-60% Shares
The previous sector is a relatively overlooked one but the IA Mixed Investment 20-60% Shares peer group is much more popular and is home to a number of well-known multi-asset funds.
Last year, its best performing member was FE Alpha Manager Mike Fox’s Royal London Sustainable Diversified Trust, which made 12.88 per cent. The £497.2m fund has a strong track record over longer timeframes, currently sitting in the sector’s top decile over three and five years.
The FE Invest team, which has the fund on its Approved List, said: “Fox has a long track record of managing socially responsible investment funds. As head of sustainable funds at Royal London for many years, he knows the investment process perfectly and has proved his stockpicking skills over time. The manager’s ethical approach is central to the investment process and adds value to the product, helping it to generate an impressive track record.”
Source: FE Analytics
In second place is T. Bailey Dynamic, headed up by Elliot Farley and Peter Askew. The £84.5m portfolio has a fund-of-funds approach, with its top holdings being Polar Capital UK Absolute Equity, RobecoSAM Smart Materials and ETFS Robo Global Robotics and Automation.
Barclays Balanced Portfolio, in third place, is the sector’s worst performer on a 10-year view. It is managed on a multi-manager basis with a range of asset management houses including BlackRock, Invesco Perpetual and Schroders.
The worst performing IA Mixed Investment 20-60% Shares funds of 2017 was Schroder MM Diversity, which made a 0 per cent return.
IA Mixed Investment 40-85% Shares
The best performing fund of the IA Mixed Investment 40-85% Shares sector last year was MFM Hathaway, with a total return of 21.7 per cent. With assets of £15.6m, the fund might be off the radar of many investors but it is currently top decile in the peer group over three and five years in addition to topping it in 2017.
The portfolio is managed with a value approach and, according to the most recent update, its largest holdings are the likes of Games Workshop Group, Toyo Tire & Rubber and John Menzies plc. The managers said they are not looking to achieve ‘firework performance’ but to score “incremental and realistic advantages” that aid performance over the long run.
Royal London Sustainable World Trust is in second place and might be more recognisable to the average investor as it has assets of £402.3m. This is another portfolio that is run by FE Alpha Manager Mike Fox and makes use of Royal London’s sustainability criteria.
Source: FE Analytics
Like the previously mentioned Royal London Sustainable Managed Growth Trust and Royal London Sustainable Diversified Trust, this offering has been a consistently strong performer in the recent past and is the highest returner of the sector over the past five years having returned more than 100 per cent.
Premier Diversified is in third place after making 17.81 per cent in 2017. It is headed up by Premier Asset Management chief investment officer Neil Birrell and offers exposure to a wide range of assets, including stocks, bonds, hedge funds, property and private equity.
The IA Mixed Investment 40-85% Shares sector’s worst performance last year came from BNY Mellon Dynamic Total Return, which made a 2.13 per cent loss.
IA Flexible Investment
Last up is the IA Flexible Investment; as mentioned, this was the highest returning multi-asset sector in 2017 after its average member generated an 11.21 per cent total return.
Robin Geffen’s Neptune Global Alpha fund was the highest returner with its 25.33 per cent gain; indeed, this is the best performance of all the funds in the four multi-asset sectors looked at in this article.
Square Mile Investment Consulting & Research, which gives the £94m fund an ‘A’ rating, said: “We see this fund as one of the purest expressions of Neptune's macroeconomic views, global sector based investment process and company analysis. It has a truly unconstrained and high conviction approach and the manager is not afraid to aggressively reposition the portfolio should Neptune's investment outlook change.
Source: FE Analytics
“This strategy should be considered a way to gain exposure to areas/sectors of the world most likely to experience strong growth, as identified by the investment team. This tends to mean that when its views prove to be correct, the rewards to an investor can be bountiful. However, if part of the process goes awry this can hamper returns.”
The worst performance of the sector came from Pimco GIS Strategic Income, which was down by 0.47 per cent in 2017.