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Global Equity Income & UK Gilt Funds Fail to Make the Grade in Latest FE Crown Ratings Rebalance

By Corporate FE News

Updated on Monday, 24 July, 2017

  • Global Equity Income, UK Gilt and Short Term Money Market funds fail to pick up five Crowns
  • Old Mutual tops the leader board and T.Rowe Price sees biggest positive ratings shift
  • Woodford Equity Income achieves five FE Crowns on first rating

FE’s latest bi-annual Crown ratings rebalance has awarded 317 funds with the highly-prized five FE Crowns, of which 11 are newcomers and 25 have jumped two or more FE Crowns to achieve the top accolade.

Woodford Equity Income, Blackrock Asia Special Situations and BNY Mellon Japan Small Cap Equity Focus are among the previously unrated funds (due to lack of three-year history) going straight to the highest FE Crown ranking at this rebalance.

All sectors have seen some churn in the ratings of their funds.  Approximately a quarter of IA funds gained or lost FE Crowns at this rebalance with 63% of funds in the UK Equity & Bond Income sector seeing change and 60% of funds in the Money Market and Short Term Money Market sectors seeing movement. 

Sectors – best and worst of class

Stripping out the Unclassified sector, the Global sector bagged top spot in terms of the number of five FE Crown rated funds with 30, followed by the Specialist sector with 26 and Europe Excluding UK with 22.

The Japanese Smaller Companies, UK Equity and Bond Income and Europe Excluding UK sectors have taken home the lion’s share of five FE Crowns in terms of the percentage of the sector this rebalance.

The sectors with the highest percentage of five FE Crown rated funds:

Sector

No. 5 Crowns

Percentage of sector

IA Japanese Smaller Companies

2

29%

IA UK Equity & Bond Income

3

27%

IA Europe Excluding UK

22

25%

IA UK Index Linked Gilts

2

22%

IA Asia Pacific Excluding Japan

17

20%

 

FE can reveal that no Global Equity Income, Short Term Money Market or UK Gilts funds are five Crown rated at this rebalance and only 5% of the Sterling Strategic Bonds and 7% of the Sterling Corporate Bonds sectors have achieved the top mark.

The sectors with the smallest percentage of five FE Crown rated funds:

Sector

No. 5 Crowns

Percentage of sector

IA Global Equity Income

0

0%

IA Short Term Money Market

0

0%

IA UK Gilts

0

0%

IA Sterling Strategic Bond

4

5%

IA Sterling Corporate Bond

5

7%

 

Rob Gleeson, head of FE Research, said: “It has been an eventful six months both economically and politically since our last rebalance and markets have continued to be difficult for managers to predict. 

“From a sector perspective, the latest rebalance shows a similar story to January’s FE Fund Crowns.  Managers are generally finding fertile ground in more specialist, less researched industries which is where active management is widely believed to pay dividends.

“Funds that are looking for higher yields to boost returns are struggling in the low-rate environment, and the additional uncertainty around a possible rate rise is also being felt most acutely by them.” 

Groups

Old Mutual Global Investors take the title of highest number of five FE Crown rated funds this year with 14.  Last year’s top group – Fidelity – is tied for second place with Janus Henderson Investors and T.Rowe Price at 11 five FE Crown rated funds each.  

Top 5:

Asset Manager

No. of 5 Crowns

Old Mutual Global Investors

14

Fidelity International

11

Janus Henderson Investors

11

T. Rowe Price

11

Jupiter Asset Management

10

 

Although Old Mutual Global Investors is on top overall, T.Rowe Price has seen the biggest shift in funds moving to the top spot, with nine funds upgraded to five FE Crowns, closely followed by Old Mutual Global Investors with eight funds moving to five FE Crowns. 

Previously unrated

The rebalance also saw 11 previously un-rated funds (due to a lack of three-year history) jump straight to the highest rating of five FE Crowns.

Rob Gleeson commented: “The fact that large funds from Woodford and BNY Mellon are getting five Crowns at the first time of asking demonstrates that a large size does not necessarily preclude good performance.”

Previously unrated to five FE Crowns:

  • Allianz Best Styles US Equity
  • BlackRock Asia Special Situations
  • BNY Mellon Japan Small Cap Equity Focus
  • Brown Advisory US Flexible Equity
  • Capital Group Global Allocation
  • GS Euro Short Duration Bond Plus Portfolio
  • Kames Diversified Monthly Income
  • T. Rowe Price Asian Opportunities Equity
  • T. Rowe Price Frontier Markets Equity
  • VT Randolph Place Diversified
  • CF Woodford Equity Income

Funds downgraded

At this rebalance, 86 funds have shed two or more FE Crowns and four funds saw their five FE Crown status slip down to one.

FE Crowns methodology

FE Crowns are calculated by building up a ‘crown score’. The score is made up of three parts, and each part is calculated by reference to a benchmark for the fund. Once the benchmark is assigned, FE then applies three tests (an alpha based test, a volatility score and a consistency score) to the total return history of the fund. Three years of history is required to carry out these scores, so any fund with less history than this will not qualify for a rating.

Funds are assigned ratings based on their total scores, according to the following distribution:

  • the top 10% - five FE Crowns
  • the next 15% - four FE Crowns
  • the next 25% - three FE Crowns
  • the next 25% - two FE Crowns
  • the bottom 25% - one FE Crown

Mika-John Southworth, director at FE said: “We rate all funds with a three-year history and we do not charge anyone for this service. We believe that quantitative ratings have an important role to play in supporting accurate and fair comparisons of historic performance.  Our objective is to make the market more transparent and accessible – ultimately it’s about helping people make better investment decisions.”