Liontrust and Baillie Gifford have seen a number of their funds be demoted from the highest rating in FE Fundinfo’s latest quarterly rebalance as growth funds came under pressure during the first half of the year.
There are now currently 397 funds with the highest five-crown rating, as 15 gained the status for the first time and nine moved from the lowest one-crown to the highest level.
The impact of the market shift from growth to value during 2021, led to 125 funds losing their five-crown rating, including six funds from Liontrust and five from Baillie Gifford. Both investment managers were top performers in the previous rebalance report in January.
See also: Blue Whale Growth draws comparisons to Fundsmith Equity as it bags top rating in FE rebalance
Baillie Gifford American and Liontrust UK Smaller Companies tumble from top tier
Baillie Gifford’s Sterling Aggregate Bond fund was among those to fall, joined by its American fund, Global Alpha Growth fund, Investment Grade Long Bond fund and UK Equity Alpha fund.
While all five funds have strong long-term track records, with American, Global Alpha Growth and Investment Grade in the top quartile over three years, each has fallen to the bottom of their respective sectors on a six-month view.
Tom Slater (pictured) and Gary Robinson’s £7.7bn American fund, the largest of the quintet, has returned just 4% in the last six months, nearly four times less than the IA North America average of 15%.
Similarly, six of Liontrust’s star performers were also demoted from the top tier, including Anthony Cross and Julian Fosh’s £1.6bn Liontrust UK Smaller Companies fund and the £271m Global Equity fund, run by former Neptune managers Storm Uru and James Dowey.
Liontrust and Baillie Gifford funds demoted from five-crown rating
| Liontrust | Baillie Gifford |
| Liontrust UK Smaller Companies | Baillie Gifford Sterling Aggregate Bond |
| Liontrust Global Equity | Baillie Gifford American |
|
Liontrust MA Passive Moderate |
Baillie Gifford Global Alpha Growth
|
| Liontrust MA Passive Reserve | Baillie Gifford Investment Grade Long Bond |
| Liontrust MA Passive Intermediate | Baillie Gifford UK Equity Alpha
|
| Liontrust MA Passive Progressive |
Source: FE Fundinfo
Despite the demotions, Liontrust still had the second highest number of top ranking funds at 13, representing nearly a quarter of its 58-strong fund range. It was tied with Blackrock and ahead of Fidelity’s 12 five-crown funds.
Meanwhile Baillie Gifford fell all the way from second to seventh place in the latest rebalance, with nine funds achieving the five-crown rating, putting it behind Jupiter with 10 funds.
Abrdn, which finished third in the January report, was up at the top of the table this time around with 16 five-crown funds in total.
Sustainable funds lead the charge
Once again sustainable funds continued to dominate the top performers in the latest review. Many of the new entrants to the five-crown club had a sustainable bent, including the BNY Mellon Sustainable Global Equity fund and Jupiter Global Sustainable Equities fund.
“The strong performance of sustainably-focused funds has largely come about from a combination of favourable market conditions and growing interest in ESG investing from both investors, who are looking beyond returns and wanting to know where their money is going, and institutions and fund groups who are looking to diversify their propositions,” said FE Investments research manager Charles Younes.
“Additionally, as ESG investing has taken off, many sustainable funds are now coming into maturity, having been launched three or more years ago and are now eligible for a crown rating. That so many have been rated so highly and so soon, is testament to the strength of their proposition and their ability to capitalise on current market conditions,” he added.
Bonds sectors shine but income struggles
The technology sector, where a lot of sustainable funds are concentrated, also performed well this time around, FE Fundinfo noted.
Bond funds also shone over the six-month period, with the IA Global Emerging Market Bond and IA Global Government Bond sectors home to the highest number of five-crown rated funds. Nine out of 31 funds (29%) in the IA Global Emerging Market Bond sector achieved this accolade, while a quarter of the funds in the IA Global Government Bond sector did as well.
At the other end of the spectrum income strategies continued to struggle. The IA UK Equity Income sector saw just 5% of its funds attain the five-crown rating, while 4% of funds in the IA Global Equity Income sector snatched the highest rating.
The IA North American Smaller Companies sector, which was the best performer in January, saw a sharp reversal of fortunes, with only 10% of funds having a five-crown rating in July, down from 30% at the start of the year.
