Multi-manager  

Fixed income fails on its promise, says F&C

Mr Burdett, co-head of the firm’s multi-manager team, said rising rates and central bank policy meant fixed income was the most difficult asset class to pick a winning fund from in the fourth quarter of 2013.

He said one of the most striking attributes from the analysis was the continued inconsistency of the statistics from fixed income sectors.

Mr Burdett added: “Bond funds remain one of the most difficult areas to pick winning funds from, and this trend comes at a time when many are questioning the risk/reward characteristics of the asset class.

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“Last year we saw equity markets rally, with some reaching record highs, and low market volatility.

“Against this backdrop we were surprised to see that the overall total number of funds recording top-quartile performance consistently for three years was not higher and was instead at the bottom of the historic range.”

Background:

F&C’s FundWatch analysis found the Investment Management Association Global Bond and Sterling Strategic Bond sectors failed to record any funds with consistent top-quartile returns in three years.

The Sterling Corporate Bond sector recorded only one consistently top-performing fund.

The most consistent sectors for top-quartile returns were the Japan and Global Emerging Markets sectors with 4.3 per cent of funds from each category.

The newly-created Global Emerging Markets Bond sector emerged as the worst performer of the 37 IMA sectors, returning -2.2 per cent in the quarter.

Launched on 31 December 2013, the performance of the sector for the quarter was based on the historical performance of component funds.

Adviser view:

Adrian Lowcock, ‎senior investment manager for Bristol-based Hargreaves Lansdown, questioned whether quartile performance was important, stating it was “far too short term”.

He said: “The fact a fund is not in the top quartile does not tell you much. The fund could still have outperformed the benchmark and indeed its peer average but not be in the top quartile.

“It doesn’t make sense to say that funds haven’t been consistent because they were not always in the top quartile. A fund could deliver the same consistent return each quarter but, depending on what its peers do, it may be top or bottom quartile.”