Based on the three-year performance figures in this week’s Morningstar tables, the multi-asset fund, managed by Caspar Rock, chief investment officer of Architas, has returned 29.55 per cent.
This compares with the sector average, which was 27.75 per cent lower, and far outstrips the worst-performing fund in the sector, the £11.77m Scottish Widows HIFML Diversified Income portfolio, which returned just 8.27 per cent in the same period.
According to the latest fact sheet from Architas the fund, which aims to provide an above-average level of income and maintenance of capital in the medium to long term, has benefited from high holdings in global equities.
Among its top holdings are Mellon Investment’s £3.7bn Newton Asian Income Fund and £6.4bn M&G Global Dividend funds, both of which had strong runs in the past three years.
By comparison the Scottish Widows portfolio has lingered at the bottom of the Morningstar tables for some time. According to discrete data from the funds research team at Morningstar, the fund has been bottom quartile nearly every quarter for the past three years.
It has a similar-sized allocation to UK equity funds as the Architas portfolio, but with 42.1 per cent in fixed interest and a significant holding in passive bond trackers, such as the iShares eb.rexx at 3.7 per cent, it has not been able to benefit from the active participation in market rallies that boosted the underlying managers in the Architas portfolio.
According to the Scottish Widows’ HIFML Diversified Income fund factsheet, at 29 March this year the portfolio had 12.3 per cent in cash or currency funds and just 15.4 per cent in equities.
According to the factsheet, over the first quarter of the year, the managers trimmed their holdings in global equities by using liquid exchange-traded futures, and are maintaining their allocation to infrastructure, citing “decent yield” and “a strong run” from the holdings.
The Scottish Widows fund’s objective is to produce a high level of income with potential capital growth.
Top five holdings: Architas
JP Morgan Fund Icvc - US equity: 7.2%
Newton Asian Income: 6.95%
M&G Global Dividend: 5.97%
JOHambro Capital Management UK Equity Income: 4.81%
Artemis Income 4.6%
Top five holdings: Scottish Widows
State Street Global Advisers - GBP - 9.8%
Pimco Global High Yield Bond - 6.7%
Neuberger Berman Short Duration HYB: 4.5%
Ishares JPMoran Emerging Market Bond: 4.5%
BCIF Overseas Government Bond: 3.9%
| Architas Asset Allocation | Scottish Widows Asset Allocation |
| Global equity 41.11% | Fixed income 42.1% |
| Global fixed income 21.81% | Real Assets 19.6% |
| UK equity 14.15% | Equities 15.4% |
| UK fixed income 13.01% | Cash 12.3% |
| Other 6.03% | Total return 10.6% |
| Property & Money Market 3.90% |
Adviser analysis:
Darius McDermott, managing director of London-based Chelsea Financial Services, said: “The Scottish Widows portfolio is run by the Insight Investment multi-asset groups and should be a good mix but it only has 15 per cent in equities, particularly iShares’ exchange-traded funds rather than active equity income funds. This might explain why it has been 10 per cent or so below the sector average in the past three years.
“The bottom line is that the fund has performed consistently poorly, particularly in the past three years, and is a regular in our red zone. We have a ‘switch’ notice on this fund and would advise clients to move.
“The Architas fund, managed by Caspar Rock and his team, is full of active fund managers and some very strong players, such as Invesco Perpetual High Income, many of which are in our Chelsea buy list.
“It also has a higher amount in equity funds than the Scottish Widows fund and this, combined with good fund selection, appears to be why it has outperformed.”