Multi-asset  

A closer look at the worst performers

This article is part of
Multi-Asset Supplement - March 2014

Investment Adviser looked at multi-asset fund performance since the FTSE 100 bottomed in March 2009, which showed that the £7.2m Swip Absolute Return Macro fund has proven to be the worst-performing fund over the period. It was the only product to register a loss, having declined 10.8 per cent.

The fund, run by Ken Adams and Takashi Saito, was highlighted in Investment Adviser’s 2013 ‘red flag’ report into funds that could be subject to closure. But instead of shutting the fund, Swip overhauled the strategy last year. A spokesperson for the company said at the time that the changes were aimed at increasing the range of asset classes invested in “to incorporate a larger proportion of relative value investments to drive fund performance”.

In the six months to February 14, the fund has gained 1.3 per cent, outperforming its three-month sterling Libor benchmark. The RWC Core Plus fund is the second-worst performer, having gained just 3 per cent in five years. Previously known as the RWC Cautious Absolute Rate & Currency fund, former managers Peter Allwright and Stuart Frost left the company late last year. The portfolio has now been handed back to RWC’s convertible bond expert Davide Basile, who originally ran it at launch.

Speaking to Investment Adviser in January, Mr Basile gave details of his ongoing plans to change the fund into a “strategic reserve” fund, targeting a return of 3-4 per cent above cash with convertible bonds at its core.

“The fund was very liquid when we took it on but was positioned very negatively to take advantage of a big negative event, such as a euro break-up,” Mr Basile explained.

“We want to have exposure to sectors with a bit of cyclicality and growth, but we don’t want stocks that are sensitive to interest rates, like utilities and telecoms.”

Another poor performer, Barmac Asset Management’s Castleton Growth fund, has undergone changes in the period since the crisis. Since March 2009, the £7.3m fund has gained just 8.7 per cent, having previously been one of the strongest performers in the multi-asset sectors.

But following the crisis, Barmac chief executive Andrew Bartles says the fund was positioned “too cautiously” for the rebound in stockmarkets, investing in US government debt in anticipation of falls which did not transpire.

In response to the fund’s declining performance, manager Andy McCarthy revised his strategy to “desensitise” its indicators, which has helped the fund drastically improve its performance. In the 12 months to February 14, the Castleton Growth fund gained 10.5 per cent, more than double the IMA Mixed Investment 20-60% Shares sector average, ranking it 10th overall in the peer group.

While the increasing cost pressures on fund managers are increasing the rate at which funds are closing, it is often still preferable to management groups to alter the strategy of an underperforming fund.

Nick Reeve is deputy news editor at Investment Adviser