Analysts at the ratings agency said they had lost conviction in the Majedie UK Income Fund following changes made by its manager Chris Reid, and raised concerns over the growing scale of Liontrust’s UK Smaller Companies Fund.
FE said it had focused on how to “protect capital from unpredictable markets and increase portfolio diversification” in its latest review.
Research manager at FE, Charles Younes, said the Majedie UK Income manager had “significantly changed the process of the fund to the extent that we believe our reasons for holding the fund are no longer valid”.
Liontrust’s UK Smaller Companies Fund was dropped due to FE’s concerns it was “now too large to be able to implement its strategy so are uncertain how it will perform in future”, according to senior analyst Thomas McMahon who said the group’s UK Micro Cap Fund was a sound alternative.
The Liontrust Special Situations Fund was also one of the 12 dropped funds, as were the Invesco Perpetual Global Smaller Companies, Rathbone Global Opportunities and Jupiter Distribution funds.
Additions to the list included the TB Amati UK Smaller Companies, Franklin UK Equity Income, Premier Defensive Growth and the BlackRock Absolute Return Bond funds – added for their low risk, low return profile.
They replace Absolute Insight, which has which has been low risk, but negative returns recently, said Rob Gleeson, head of FE fund research.
He added that while not trying to call the direction of gilts, they remained the best asset class for capital protection.
Gleeson said: “While there is some capital risk posed by a sell-off in gilts, this will likely be coupled with a rally in equities.”
