LONDON, 23 JULY 2018: FE’s latest bi-annual Crown Fund Ratings rebalance[1] has awarded 321 funds with the highly-prized 5 FE Crowns, of which 10 are newcomers and 31 have jumped two or more FE Crowns to achieve the top accolade.

TwentyFour Corporate Bond, L&G Multi Asset Income and Royal London Enhanced Cash Plus are among the previously unrated funds[2] going straight to the highest FE Crown ranking of 5 at this rebalance. From a sector perspective, IA China/Greater China and IA Asia Pacific ex Japan, which both outperformed their index[3] in the six months since the last FE Crown rebalance, are among the biggest winners in percentage terms with 40.5% of funds receiving a 4 or 5 FE Crown Fund Rating. 

Conversely, none of the funds in the IA Global Equity Income sector received a 5 FE Crown Rating and 49% were awarded the lowest 1 FE Crown at this rebalance.  The UK Equity Income sector’s poor run also showed no signs of improving with just 11% of funds receiving a 4 or 5 FE Crown Rating. 

Rob Gleeson, head of research at FE, comments: “Markets have continued to be difficult for managers to predict in the six months since our last rebalance.  The year started strongly, but this enthusiasm didn’t last and there was a sharp sell off at the start of February. Fears of monetary tightening escalated into a short-lived global market sell-off.  Escalation of the US-led trade war has remained the main concern for markets.

“From a sector perspective, the latest rebalance shows a similar story to January’s FE Fund Crown rebalance.  Managers are generally finding fertile ground in more specialist, less researched industries which is where active management is widely believed to pay dividends.”

Groups

Looking at outright numbers of 5 FE Crown Rated funds, BlackRock and Schroders share the top spot with 11 FE 5 Crown Rated funds a piece.  BlackRock moves up from joint second place at the last rebalance and Schroders moves up from joint fourth.  

Previously unrated funds receiving 4 or 5 FE Crowns

Funds must have three years of history to qualify for a FE Crown Rating.  At this rebalance, 10 previously unrated funds have achieved the highest ranking of 5 FE Crowns and 17 were awarded 4 FE Crowns. 

Upgrades & downgrades

Eight funds have been upgraded by three or more FE Crowns at this rebalance.   Of these, Sophie Meatyard, fund analyst at FE, picks out Pictet Clean Energy which has moved from 2 FE Crowns to 5: “This fund has achieved superb performance year-to-date relative to the FE-assigned benchmark – FTSE World Alternative Energy. Despite the sector allocation detracting, the manager’s stock picking skills have seen the portfolio outperform the index by nearly 40 percent over the last year.”

There are 26 funds that have been downgraded by 3 FE Crowns or more at this rebalance.

FE Crown 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

Rob Gleeson, said: “We rate all 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 and provide useful information when trying to distinguish repeatable performance characteristics. Quantitative ratings add useful context to returns and help separate funds that have had a good run from those with a more stable foundation for their performance. Our objective is to make the market more transparent and accessible – ultimately it’s about helping people make better investment decisions.”

[1] All IA sectors

[2] Due to a lack of three-year performance history

[3] At 31^st December 2017 – 30 June 2018

-ENDS-

 For more information contact the FE press team at James.Hoey@financialexpress.net