Evenlode Income and Findlay Park American have been revealed as the most favoured active funds with the UK’s largest fund-of-funds, according to a new Morningstar report seen by Portfolio Adviser.
Findlay Park American is held by 16 UK fund-of-funds with assets of at least £1bn and represents an average weighting of 11.1% in those portfolios. Evenlode Income is held by the same number of fund-of-funds and represents an average weighting of 8%.
The Morningstar report analysed £150bn worth of large fund-of-fund ranges offered by the likes of Vanguard, Aberdeen Standard Investments and BMO Global Asset Management.
It found fund-of-funds did not always live up to their reputation of being underperforming and overly expensive. Those asset managers that have passive fund-of-funds or fettered products had an average charge of 0.55%, while those that solely used third-party funds charge an average of 1.14%.
Overall, the group studied underperformed on an absolute basis but outperformed on a risk-adjusted basis, particularly those products in low equity categories.
The analysis also examined the underlying holdings in the fund-of-funds.
Within passives, Vanguard dominated the most popular funds measured on an assets under management basis, but Morningstar attributed this to the success of the Vanguard Lifestrategy products. The most popular Vanguard funds were the Global Bond Index, FTSE Developed World ex-UK Equity Index and FTSE UK All Share Index.
In the Vanguard FTSE Developed World ex-UK Equity Index fund fund-of-funds accounted for 54.4% of underlying assets.
But while the Vanguard Global Bond Index and FTSE Developed World ex-UK Equity Index funds were held respectively by eight and five funds, Blackrock products were held more widely. The iShares UK Equity Index fund was held by 34 fund-of-funds and the iShares Japan Equity Index was held by 32.
Morningstar said this indicated Blackrock may be the preferred provider of tracker funds for asset managers who do not have a passive range of their own.
While Evenlode Income and Findlay Park American were the most widely-held funds by AUM, two funds were held by more fund-of-funds, albeit at at a lower weighting.
Miton European Opportunities and Federated Hermes Asia ex-Japan are both held by 17 funds, but represent an average weighting in portfolios of 2.6% and 2% respectively.
Evenlode Income had one of the higher proportion of fund-of-funds investors, representing 28%, while in Miton European Opportunities fund-of-funds represented a quarter of AUM.
But the fund with the largest proportion of AUM held by fund-of-funds was the Allianz Strategic Bond fund with 46.7%.
