• Sterling Strategic bonds and North American Smaller Companies among leading sectors with highest percent of 5-Crown funds.

LONDON, 29 JULY 2019: FE’s latest bi-annual Crown Fund Ratings rebalance has awarded 366 funds with the highly-prized 5 FE Crowns which is an 8.93% increase from last year. Of these funds, 7 are newcomers, which is less than half the number of newcomers compared to last year, and 37 have jumped 3 or more FE crowns to achieve the top accolade.

The Sterling Strategic Bonds sector has significantly increased its number of 5 crown rated funds since last year and has topped the sector charts with 32.1% of its funds achieving a 5-crown rating. This is followed by the North American Smaller Companies sector (21.4%), UK smaller companies (18.8%) and Volatility Managed (18.4%).

Charles Younes, Research Manager at FE, comments: “Over the last three years, bond markets went through an entire cycle. Strategic bond managers benefitted from their flexibility to invest across the fixed income spectrum. As a result, strategic bond managers generated returns with less volatility, and more compelling risk-adjusted returns.”

There were a number of fund sectors that failed to achieve any 5 Crown-rated funds: IA European Smaller Companies, IA Global Equity Income, IA Japanese Smaller Companies, IA Short Term Money Market, IA Standard Money Market and IA UK Equity & Bond Income.

Sectors

New entrants

Funds must have three years of history to qualify for a FE Crown rating.  At this rebalance, 7 previously unrated funds have achieved the highest ranking of 5 FE Crowns. Among these are AXA World Funds, Framlington UK, BlackRock Sterling Strategic Bond and Unicorn UK Ethical Income.

Amy Kennedy, Fund Analyst at FE, comments: “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.”

The Liontrust UK Micro Cap Fund is a newly-rated fund and is starting with a 5-crown rating. It’s also the only newly 5-crown rated fund to be on the FE Invest approved list.

Kennedy, comments: “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. 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”

Groups
Looking at the groups with the most 5 crown rated funds in this latest rebalance, Blackrock is one of the biggest winners moving up from 8^th to 1^st place since January’s rebalance.

Tanvi Kandlur, Senior Fund Analyst at FE, comments: “Many of BlackRock’s funds have seen upgrades at this rebalance reflecting the strong performance across the wide range of strategies the firm offers.”

Liontrust also deserves a mention as over 50% of its funds have been awarded five FE-crowns in this latest rebalance. Overall, Liontrust comes joint-second along with T.Rowe Price.

Sophie Meatyard, Fund Analyst at FE, comments: “The Liontrust Sustainable fund range has performed particularly well over the last year. The funds have outperformed their respective benchmarks significantly, driven by their decisions to exclude oil and gas companies which has been a good call and for many funds, structural biases towards technology companies has been positive. On top of this stock selection for the individual funds has been excellent.”

Groups

Funds

11 funds have moved from a 1-crown to a 5-crown rating since January. This includes Aberdeen Strategic Bond, Hermes Multi-Strategy Credit and Quilter Investors Bond 1, which all sit under the Sterling Strategic Bond sector. The UK All Companies Sector had three funds move in same suit; EdenTree UK Equity Growth, Sanlam Active UK and Slater Growth.

Charles Younes, Research Manager at FE, comments: “The Hermes credit team have done very well over the last six months, benefitting from both the risk-on environment and tightening credit spreads. Strong gains made in 2019 so far has more than offset the losses generated in the fourth quarter of 2018.”

FE Crowns Rating methodology

FE Crown ratings are calculated by building up a ‘crown score’. The score is made up of three parts, and each part is calculated by reference to a benchmark for the fund. Once the benchmark is assigned, FE then applies three tests (an alpha based test, a volatility score and a consistency score) to the total return history of the fund. Three years of history is required to carry out these scores, so any fund with less history than this will not qualify for a rating.

Funds are assigned ratings based on their total scores, according to the following distribution:

• the top 10% - 5 FE Crowns
• the next 15% - 4 FE Crowns
• the next 25% - 3 FE Crowns
• the next 25% - 2 FE Crowns
• the bottom 25% - 1 FE Crown

Charles Younes, FE Research Manager, said: “We rate funds with a three-year history, and we do not charge anyone for this service. We believe that quantitative ratings have an important role to play in supporting accurate and fair comparisons of historic performance but not future performance.  Our objective is to make the market more transparent and accessible – ultimately it’s about helping people make better investment decisions.”

For more information about the methodology, please contact the press office. 

-ENDS-

NOTES TO EDITORS

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