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UK Gilts Top Sector Charts in Latest FE Passive Crown Rebalance

By Corporate

Updated on Monday, 26 February, 2018

  • Index-Linked Gilts surprise as none achieve a maximum rating
  • Blackrock (iShares) retains group top spot

LONDON, 26 FEBRUARY 2018: FE, the leading UK investment ratings and research agency, today announced that over a third (38%) of UK Gilts funds and 30% of Property funds achieved the highly-prized five FE Passive Crown rating at the latest rebalance, whilst none of the Index-Linked Gilt or Sterling Corporate Bond funds made the top grade.   

In total, 286 passive funds were rated in the bi-annual FE Passive Crown ratings rebalance. The ratings are designed to check how well a passive fund is doing its job at tracking its benchmark over three years. Funds are ranked objectively and transparently using a quantitative methodology in which funds are ranked between one and five FE Passive Crowns.

Portfolio Manager at FE, Oliver Clarke-Williams said: “The high number of UK Gilts funds which have been awarded five FE Passive Crown ratings is largely down to the fact that they are highly liquid and easy to replicate.  It is therefore very surprising that none of the Index-Linked Gilts returned a maximum rating given that they operate in a very similar market.

“On the other hand, the absence of any five FE Passive Crown rate Sterling Corporate Bond funds can be explained by difficulties in replication due to the vast number of holdings in many indices and over-the-counter dealing.”

The percentages of five FE Passive Crown funds rated in each sector are:

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Groups

At a group level, Blackrock (iShares) comes out top with 22 five Passive Crown rated funds followed by Vanguard with 12.

Newly Rated Funds

This rebalance saw nine funds rated for the first time due to meeting the three-year performance history requirement.  Of these, Vanguard’s FTSE 250 UCITS ETF leapt straight to a five FE Passive Crown rating and the iShares UK Credit Bond Index achieved a four FE Passive Crown.

FE’s latest Passive Crown ratings follow the recent active Crown rating rebalance in January 2018. FE launched its Passive Crown ratings in 2015 as there had been a gap in the availability of quality research on passive funds owing to their complexity.

Oliver Clarke-Williams commented: “More people are investing in passive funds and are increasingly choosing passive exposure to global markets. Therefore, more due diligence is needed to match that available for active funds. FE Passive Crown ratings are a very good way for people to do just that.

“What the ratings show is that the past tracking ability of a passive fund can be used as a guide to how well that group will track an index in the future. The difference between the best and worst trackers/ETFs is large and makes a significant impact on the value of your investment.”

-ENDS-