Eleven funds previously ranked four or five crowns were downgraded to one crown, the lowest rating given by the research and analytics provider.
Twenty-six funds in total were downgraded by three or more crowns during the last rebalance.
Only five funds, including the Architas MA Active Reserve and SVS Church House Deep Value Investment, were able to make the leap from a one-crown to a four or five-crown ranking.
Mixed fortunes for TwentyFour
FE’s rebalance brought mixed fortunes for two of Twentyfour AM’s better known funds.
Its £1.8bn Twentyfour Dynamic Bond fund was the only 5-crown fund to fall all the way to 1 crown. The fund is co-managed by three of the firm’s partners, including CEO Mark Holman, in addition to three other portfolio managers.
Although the fund is first quartile over five-years and second quartile over one and three years, it is now third quartile on a six-month view. Over three-months it has returned -1.3% versus the IA Sterling Strategic Bond sector’s -0.2%, putting it fourth quartile.
Meanwhile Chris Bowie’s younger Twentyfour Corporate Bond fund was immediately ushered into the five-crown club from being previously unrated. Launched in January 2015, it has grown to £646m and been first quartile over one and three years.
Nine other previously unranked funds, including the L&G Multi Asset Income and Royal London Enhanced Cash Plus funds, were also awarded the top accolade straight off the bat after meeting the requisite three years of data to qualify for a FE crown rating.
Funds with the biggest downgrades
| Fund | Previous crown ranking | New crown ranking |
| Twentyfour Dynamic Bond | 5 | 1 |
| Allianz Global Fundamental Strategy | 4 | 1 |
| Barclays GlobalAccess Pacific Rim (ex-Japan) | 4 | 1 |
| Barings Strategic Bond | 4 | 1 |
| Candriam Bonds Credit Opportunities | 4 | 1 |
| M&G Episode Growth | 4 | 1 |
| Quilter Investors US Equity Small/Mid-cap | 4 | 1 |
| Schroders US Mid Cap | 4 | 1 |
| SJP Money Market | 4 | 1 |
| TM Cavendish UK Balance | 4 | 1 |
Source: FE
Several US equity managers saw a sharp reversal of fortunes, including Schroders’ mid-cap investor Jones (pictured).
Standing at £2.1bn, the Schroders US Mid Cap fund is one of the largest funds in the crop of funds that suffered the biggest downgrades. The fund has failed to beat peers over the short-term, returning 6.2% and 8.4% over six-months and one year compared with the IA North America’s returns of 7.7% and 14.0%.
In June, Morningstar downgraded two funds run by Jones due to concerns over high fees.
Equity income still on the outs
On a sector view, funds in the IA China and IA Asia Pacific Ex Japan sectors were the biggest winners with 40.5% of funds receiving a four or five crown rating in the six months since the last rebalance.
Meanwhile funds in the IA Global Equity Income and UK Equity Income sector languished at the bottom of the rankings.
Nearly half of the funds in the IA Global Equity Income sector were awarded the lowest rating at this rebalance.
Not a single fund from this sector currently has a five crown rating, while only 11% of funds in the IA UK Equity Income sector have a four or five crown rating.
Commenting on the results, Rob Gleeson head of research at FE said: “Markets have continued to be difficult for managers to predict in the six months since our last rebalance. The year started strongly, but this enthusiasm didn’t last and there was a sharp sell off at the start of February. Fears of monetary tightening escalated into a short-lived global market sell-off. Escalation of the US-led trade war has remained the main concern for markets.
“From a sector perspective, the latest rebalance shows a similar story to January’s FE Fund Crown rebalance. Managers are generally finding fertile ground in more specialist, less researched industries which is where active management is widely believed to pay dividends.”
