Funds employing a value approach are outperforming those that use different styles, according to FE Fundinfo’s latest Crown Ratings rebalance.
After a decade of low interest rates favouring growth stocks, the trend has reversed in recent years with value coming into play.
Overall, 163 funds gained the top ‘five Crown’ rating during this latest rebalance, bringing the total number to 340.
See also: Value investing and ESG make uneasy bedfellows
To qualify for the highest rating, funds must be in the top 10% of ‘Crown Scores’, which are calculated in three parts, each referenced to a benchmark. Funds must also have a three-year history to qualify.
Charles Younes, head of manager selection at FE Investments, said: “This trend towards a value style differs from that of six months ago. Funds such as LF Morant Wright Japan or Schroder Global Recovery have done well and been upgraded to a four or five crown rating because of their strong outperformance over the last three years.
“Despite the style being out of favour for so long, they have maintained their valuation discipline approach which has finally paid off recently. This trend towards value is worth keeping an eye on and it will be interesting to see if it persists if we reach the peak of the interest rate cycle.”
By sector, 30.4% of IA Infrastructure strategies achieved a five Crown rating – the highest of any grouping within the IA universe.
It was closely followed by the IA Sterling Strategic Bond sector which saw 23 of its 77 (30%) funds awarded the highest score.
From a group perspective, M&G gained the most top ratings, with six strategies finding themselves in the top bracket, taking the asset manager’s overall total to nine. Schroders strategies rose by five, taking their total to 13.
Younes noted that both groups have a stronger value discipline, with a willingness to not overpay for growth.
Meanwhile, Seven Investment Management (7IM) saw all five of its previously five Crown-rated funds downgraded to a lower rating. Four Fidelity funds were also stripped of the top bracket.
Overall, Quilter Investors holds the highest percentage of five Crown-rated funds, with 24% of its 54 offerings achieving the top rating.
FE Fundinfo ratings by group
| Group | Number of funds | Number of five Crown funds | % of five Crown funds | |
|---|---|---|---|---|
| Quilter Investors | 54 | 13 | 24% | |
| Schroders | 102 | 13 | 13% | |
| Royal London | 49 | 12 | 24% | |
| BNY Mellon | 54 | 10 | 19% | |
| Invesco | 58 | 10 | 17% | |
| M&G UK | 43 | 9 | 21% | |
| Scottish Widows | 51 | 7 | 14% | |
| Jupiter Asset Management | 63 | 7 | 11% | |
| Fidelity | 85 | 7 | 8% | |
| True Potential Investments | 26 | 6 | 23% | |
| Premier Miton | 36 | 6 | 17% | |
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