Some 40 per cent of the funds that made top-quartile returns in the most cautious multi-asset sector over the past five full years have dropped to the bottom of the performance table during 2018, FE Trustnet research shows.
After looking at the UK funds and the international equity funds that got off to a bad start in 2018 having performed well during the previous five-year period, FE Trustnet has turned its attention to the Investment Association’s four multi-asset sectors.
The most resilient mixed asset sector this year is IA Mixed Investment 20-60% Shares, where only 10 per cent of the funds that are top-quartile over five years falling into the bottom quartile in 2018. The least resilient was IA Mixed Investment 0-35% Shares, where two-fifths of top performers have moved into the bottom quartile this year.
For this article, we filtered the entire Investment Association universe to find out which multi-asset funds have been in their sector’s bottom quartile during the first five months of 2018 but were top quartile during the five years to end-2017.
Although it is worth bearing in mind that there are still just over six months of the year remaining and some may yet turn the tables.
Source: FE Analytics
As the above chart shows, during the first five months of 2018 21 previously top-performing multi-asset funds have lost money.
The five FE Crown-rated JPM Diversified Growth fund – overseen by David Chan, Jonathan Cummings and Peter Malone – was the worst performer, with a 3.67 per cent loss for the year to 31 May 2018.
Over the five years to end-2017, though, the fund delivered a 94.73 per cent total return compared with a 51.67 per cent gain for the IA Flexible Investment sector, a performance that has put the strategy in the top quartile over that period.
Another fund from the IA Flexible Investment sector follows JPM Diversified Growth, the five FE Crown-rated Investec Global Multi-Asset Total Return fund.
The £175.8m fund is run by Philip Saunders alongside Iain Cunningham and has been third quartile over three years but top quartile over five years with an 84.01 per cent cumulative return. The fund has posted a 2.84 per cent loss for the year to 31 May 2018.
Jupiter Distribution, overseen by FE Alpha Manager Alastair Gunn alongside Rhys Petheram, has also made it onto our list of long-term outperformers struggling in 2018.
According to Square Mile Investment Consulting & Research, the £971.3m Jupiter Distribution fund has been designed to appeal to the more risk averse investor, seeking a steady and regular yield with modest capital gains.
“Whilst the fund is only likely to invest a majority of the portfolio in investment grade corporate bonds and high yielding UK equities, and therefore in some respects may appear less diversified than other multi-asset offerings, we feel the collegiate approach of the managers, the integrated manner within with they work and their understanding of the investor base are a compelling combination for a fund such as this,” they added.
Performance of fund until end of May
Source: FE Analytics
Jupiter Distribution is down by 1.63 per cent compared with a 0.37 per cent loss for the IA Mixed Investment 0-35% Shares sector during the first five months of 2018.
We were also left with some large IA Mixed Investment 40-85% Shares funds that are top performers over five years but struggling in 2018, including the £2.6bn OM Cirilium Moderate Portfolio.
The fund has been overseen by FE Alpha Manager Paul Craig since 2008 and holds the maximum number of FE Crowns.
OM Cirilium Moderate Portfolio is one of the multi-asset funds that has achieved the feat of top quartile returns with low volatility over the last five years.
Over the five years to end-2017, the fund delivered a 67.87 per cent total return compared with a 52.43 per cent gain for the IA Mixed Investments 40-85 % Shares sector.
Another fund that has had a weak start to 2018 is the £689.9 Fidelity Multi Asset Income fund, managed by Eugene Philalithis alongside deputy manager Chris Forgan.
The fund aims to achieve an income yield typically within a range of 4-6 per cent per annum and will invest primarily in funds including those managed by Fidelity. It may also invest directly in company shares, bonds, money market instruments, cash and deposits.
According to Square Mile, the Fidelity multi-asset team is a strong and well resource team that is able to “leverage off the considerable wider resources of the group”.
Square Mile analysts added: “The experienced lead manager has demonstrated he is able to successfully deliver the objective being mindful of the overall level of risk he is exposing investors to.
“We believe this is a good offering and worthy of considering for those requiring an attractive regular income stream but who are not prepared to take on a significant level of risk in order to achieve it.”
Performance of fund until end of May
Source: FE Analytics
During the first five months of 2018 Fidelity Multi Asset Income is down 1.10 per cent versus a 0.32 per cent loss for the IA Mixed Investment 0-35% Shares sector. However, over the five years to end-2017 the fund has posted a 38.77 per cent total return compared with a 25.99 per cent gain for its sector.