Quilter Investors has flagged two funds as needing action due to underperformance in its latest assessment of value report.
The firm’s board assessed 24 of its multi-asset funds and gave the Quilter Investors Diversified Portfolio and the Strategic Bond fund a ‘red’ rating based on overall long-term performance, which means “action required and in progress”.
Diversified Portfolio underperforms benchmark
The report said the Diversified Portfolio had generated a lower return than its target benchmark after charges for the seven years up to 31 March 2021. It had also underperformed its performance comparator including over the rolling seven years since launch.
While the fund had matched or exceeded its target of CPI plus 4% for four out of seven of the years to the end of 2020, Quilter noted the excess return in up years was not enough to counteract the down years, leading to overall underperformance.
According to Trustnet, the Diversified Portfolio has returned 12.1%, 8.7% and 19.9% over one, three and five years, respectively, compared with 12.6%, 14.6% and 27.9% for the IA Mixed Investment 20-60% Shares sector average.
A new manager, Sacha Chorley, was appointed to the fund in April 2019 and Quilter said while performance had improved, it would take more time for positive results to show from the change.
See also: How can asset managers address their assessment of value issues?
Strategic Bond lags sector
The Strategic Bond fund was also flagged for performance issues because as at 31 March 2021 it had lagged the IA Sterling Strategic Bond sector average. The report said the past 12 months had been challenging as “income focused approaches did not fare well in the post-Covid economic environment”.
The fund is fourth quartile over all periods, according to Trustnet, having returned 1.4%, 9.6% and 11.9% over one, three and five years, compared with the sector’s 5.1%, 16.1% and 22.1%.
A new manager, Hinesh Patel, was appointed to the fund in April 2019. Quilter said Patel had removed or reduce exposure to funds that have failed to meet expectations and increased exposure to those expected to perform well in the future. He has also increased exposure to absolute return and reduced interest rate risk.
“It is anticipated these changes will help to improve long-term fund performance,” the report said.
Amber ratings
Elsewhere, the Quilter Investors Creation Portfolio range of five funds – adventurous, balanced, conservative, dynamic and moderate – were awarded ‘amber’ for performance. An amber award suggests a fund “offers value but further review may be required”.
The Quilter Investors Diversified Portfolio and Strategic Bond fund both also picked up an amber rating for ‘quality of services’, which is an assessment of the range, quality and value of the services it provides.
Overall, Quilter gave 17 of its 24 funds a ‘green’ rating which means they delivered their primary investment objective of growth and long-term outperformance relative to their index/benchmark.
Writing in the report, Quilter Investors chairman Tim Breedon (pictured) said: “The majority of our funds have delivered against their investment objectives over the long term (five years). While shorter-term performance has, in some instances, been mixed, I’ve been impressed with the speed at which this has been identified and the range of options generated to address any issues that have arisen as a result.”
See also: Quilter to make hundreds redundant as it cuts costs
