Fixed income and infrastructure funds benefitted from turbulent market conditions as the sectors soared in FE Fundinfo’s latest crown rating rebalance.
Six out of 21 funds in the IA infrastructure sector received a five-crown rating, which is awarded to the top 10% of funds over a three-year period, while the IA sterling strategic bond sector had 21 of its 77 strategies in the top bracket.
The most-improved individual strategies included the Schroder Sustainable Bond, BNY Mellon Global Dynamic Bond Income and Man GLG Strategic Bond funds.
Meanwhile, the funds that fell most sharply were largely invested directly in commodities, with Barings Global Agriculture, FP Foresight UK Infrastructure Income, Lazard Commodities and Pimco GIS Commodity Real Return among the biggest losers.
Overall, 106 strategies attained the top FE rating to bring the total of five-crown funds to 351 – a drop from the 397 at the last rebalance in July.
The latest rebalance saw 50 funds change their rating by a mammoth three or four crowns, up from 35 in the last update.
Charles Younes, research manager at FE Investments, said: “What we see from the funds that did well in this most recent rebalance are that they had high exposure to alternatives and therefore benefitted from the diversification here during recent tumultuous markets.
“From the equity funds whose ratings have changed significantly, we can also see that when market cycles move fast as they have done in the last three years, stock selection can fall in and out of favour quite quickly.”
FE Fundinfo crown ratings are determined by building a ‘crown score’, which consists of three-year performance against a fund’s benchmark. FE Fundinfo then applies three tests, made up of an alpha based test, a volatility and a consistency score. The top 10% of funds are then awarded a five-crown rating, while the bottom 25% receive one crown.
At a group level, BNY Mellon received the most top ratings with 12 of its 53 offerings awarded five crowns. Premier Miton, which headed the table after the last rebalance, dropped to joint-sixth with seven of its funds in the top 10%.
Younes added: “This is the last rebalance that will take into account the extreme market conditions caused by the Covid pandemic. As the ratings consider three-year performance this latest rebalance takes into account the Covid sell off, the pandemic rally of growth stocks and now a market rotation with a move in favour of value and a rising interest rate environment.
“For the next rebalancing we will lose that Covid sell off so managers will not be judged on such a variety of different market conditions. This is where the crown rating really shows its value as it is a good assessment of managers’ skill rather than just favouring a particular investment style.
“Crown ratings offer investors an opportunity to compare and contrast the performance of a fund over an extended period of time and throughout different market conditions. As the last three years have shown significant and quick market rotation, the crown ratings are more important than ever to give a solid quantitative assessment of a fund’s performance over a market cycle.”
FE Fundinfo crown ratings January 2023
| Position | Asset Manager | No.5 Crowns |
|---|---|---|
| 1 | BNY Mellon | 12 |
| 2 | Fidelity | 11 |
| 3 | Royal London | 10 |
| 3 | Quilter Investors | 10 |
| 4 | Schroders | 9 |
| 5 | Invesco | 8 |
| 5 | Jupiter Asset Management | 8 |
| 6 | First Sentier | 7 |
| 6 | Premier Miton | 7 |
| 6 | BlackRock | 7 |
| 7 | abrdn | 6 |
| 8 | True Potential Investments | 5 |
| 8 | 7IM | 5 |
| 8 | JP Morgan | 5 |
