Multi-asset funds are top performers

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

Investment Adviser looked at the performance of the 411 retail multi-asset funds which have at least a five-year track record to analyse which performed the best in absolute terms since the beginning of March 2009, when the market bottomed following the collapse of Lehman Brothers the previous September. These funds have also navigated the eurozone crisis of 2011/12 and the early stages of quantitative easing tapering.

During this period the FTSE 100 index has risen 71.6 per cent, while UK 10-year gilts are still higher in price terms than in March 2009 in spite of the recent falls.

A total of 27 multi-asset funds returned 100 per cent or more, according to the data from FE Analytics, including nine products investing solely in investment trusts.

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Holding equities during a strong equity bull market undoubtedly assisted most funds of investment trusts, but picking the right entry points to take advantage of share price discounts is also an important skill.

Peter Walls’ Unicorn Mastertrust leads the way with a return of 167.7 per cent, having ranked in the top-10 best-performing funds in the IMA Flexible Investment sector in four out of the past five calendar years. The fund’s one year outside of the top 10 in 2011 saw the fund plummet to the bottom quartile, indicating the inherent risks of investing in what is technically a 100 per cent equity portfolio, even if the underlying investments are more diverse.

It is a similar story for the Investec Managed Growth, Henderson Global Strategic Capital and F&C Multi-Manager Investment Trust funds. All three were among the 10 strongest funds in the IMA Flexible Investment sector in 2009, 2010 and 2012 in terms of absolute performance in each year, as they were each geared fully into the equity market. But during stress – 2008, 2009 and 2011 – the products were near bottom of their sector.

Another notable group of funds to have outperformed are ‘fettered’ funds of funds. Threadneedle, Old Mutual Global Investors, GLG, Invesco Perpetual and JPMorgan Asset Management all offer funds which invest solely in their own products, all of which have gained more than 100 per cent in the period in question.

In addition, managers of fettered funds often work at close quarters with the managers they invest with – their own colleagues – and so can easily access their latest views and keep on top of portfolio changes.

The performance is most likely due to the strength of each firm’s equity desks, which have overall proven to be strong performers since the financial crisis. As an example, the Invesco Perpetual Managed Growth fund, run by chief investment officer Nick Mustoe, invests only in products from the company’s equity desk. As well as Neil Woodford’s Income fund – soon to be Mark Barnett’s – the portfolio has more than 10 per cent in each of the Asian, US Equity and European Equity funds, all of which have posted gains of 100 per cent since the crisis.

Nick Reeve is deputy news editor at Investment Adviser