Funds that could help investors protect capital from unpredictable markets and increase portfolio diversification are the focus of the latest FE Invest Approved List rebalance.
FE rebalances its list of preferred funds twice a year. During this review 13 new funds join the list and seven leave (for full list see table below).
Rob Gleeson, FE’s Head of Research said: “There was significant uncertainty at the time of our March review and unfortunately, the last six months have provided only limited clarity. The UK remains poised on a knife edge, with every bit of good news being offset by a steady trickle of negative data. This is compounded by the uncertain nature of the Brexit negotiations and by the unpredictable trajectory of the Trump White House alongside rising geopolitical tension.
“It is difficult to make market predictions at the best of times, and in these conditions covering all bases is the wisest move. Diversification remains an investor’s best defence. The latest changes to our Approved List reflect the funds we believe are best at their respective strategies within each asset class - strategies being selected for their suitability in a wide range of scenarios, not just their short-term success.”
North American Equities see the biggest turnover this rebalance with T.Rowe Price US Equity and Legg Mason Clearbridge US Large Cap Growth replaced by Artemis US Select and Baillie Gifford American.
Charles Younes, research manager at FE, explained: “It is hard to find an active manager able to consistently beat the S&P 500. The Legg Mason fund has been very benchmark aware and therefore offers little more than a passive fund. Baillie Gifford American on the other hand is different to most US equity managers with its clear bias towards technology names.”
Artemis US Select has been on FE’s watch list for several years. The FE Research team has been eagerly following manager Cormac Weldon’s progress since he left Threadneedle as the fund he managed there was a team favourite.
FUNDS IN (see full list below)
The decision to add Jupiter Absolute Return to the FE Approved List was largely down to its focus on short selling. Younes explained: “Many absolute return managers don’t add any value at the short end but James Clunie’s fund does this very well. It has also had no correlation to the MSCI World for the past two years so should add diversification to the Absolute Return category.”
The Allianz Strategic Bond Fund has been added because it offers excellent diversification to the other bond funds in the Approved List. Younes commented: “Manager Mike Riddell’s willingness to make bold decisions to get the best returns has impressed us. The decision to maintain long duration in contrast to many of his peers is testament to this.”
The Goldman Sachs Global Core Equity Portfolio impressed the FE research team with its innovative quant driven approach, using artificial intelligence to extract data from unstructured data – such as voice, text and images – to identify quality, well run companies at attractive valuations. Its success at outperforming the MSCI World Index has also earned the fund a maximum 5 FE Crown rating.
FUNDS OUT (see full list below)
Woodford Equity Income has been removed from the Approved List and replaced with the recently launched Woodford Income Focus fund. Younes commented: “We believe the Focus fund to be better for income investors as it does not include a long tail of illiquid unlisted companies which we believe are not consistent with the aims of an income-focused fund.”
Poor stock picking is the reason Newton Global Opportunities has lost its place on the list. Younes commented: “We are concerned about the future performance of the fund and believe that those looking for a global equity fund with a growth bias are better served by investing in Baillie Gifford Global Discovery and Fidelity Global Special Situations, which are already on the shortlist.”
The Aviva Strategic Bond fund has been removed. Younes explained that this is due to “concerns that the manager has less freedom than he did previously to implement his strategy due to changes to the team at Aviva.”
FE INVEST APPROVED LIST – FUNDS IN AND FUNDS OUT BY SECTOR – SEPTEMBER 2017
EUROPE EX UK
Out: P Argonaut European Alpha
EUROPEAN SMALLER COMPANIES
In: Lazard European Smaller Companies
In: Dodge & Cox Global Stock; Goldman Sachs Global CORE Equity Portfolio
Out: Newton Global OpportunitiesEST REVIEW SEPTEMBER 20
GLOBAL EMERGING MARKETS
In: Henderson Emerging Markets Opportunities; Lazard Emerging Markets
In: Artemis US Select; Baillie Gifford American
Out: Legg Mason Clearbridge US Large Cap Growth; T. Rowe Price US Equity
In: Investec Enhanced Natural Resources; Investec Gold; Sarasin Food & Agriculture Opportunities; Woodford Income Focus
Out: BlackRock Natural Resources Growth & Income
STERLING STRATEGIC BOND
In: Allianz Strategic Bond
Out: Aviva Strategic Bond
TARGETED ABSOLUTE RETURN
In: Jupiter Absolute Return
UK EQUITY INCOME
Out: Woodford Equity Income
FE INVEST APPROVED PASSIVE LIST
Following the recent Passive FE Crown Rating rebalance, the following changes have been made to the FE Invest Approved Passive List:
iShares MSCI Emerging Markets UCITS ETF
UBS ETF - MSCI Japan UCITS ETF
Amundi ETF MSCI USA
Source S&P 500
Aviva Inv UK Index Tracking
Fidelity Index World
Lyxor UCITS ETF MSCI World
iShares Core MSCI World UCITS ETF
UBS ETF - MSCI Emerging Markets UCITS ETF
iShares MSCI Japan UCITS ETF
Source MSCI USA
HSBC FTSE All Share Index
iShares £ Corporate Bond 0-5yr UCITS ETF
Gleeson commented: “We have used the latest FE Passive Crown ratings to determine which funds to add and remove from our Passive Approved List. The ratings check how well a passive fund is doing its job at tracking its benchmark over three years, which is 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.”
FE Approved List Methodology
FE considers all funds available for sale in the UK for the Approved List. FE data and ratings are used to identify a shortlist of top performing funds. A qualitative selection criteria is then applied to produce the final recommended list.
FE accepts no payment from any of the fund managers for their participation in the ratings or review process, or for their inclusion in the shortlist.
NOTES TO EDITORS
FE is a leading provider of data, software and performance analytics to the financial services industry. FE’s products and services are designed to interpret and analyse data, helping financial advisers and investors stay well informed and ultimately make sound investment decisions. FE also provides tools and software for fund managers and other financial services firms, including products to assist with fund reporting and analysis as well as fund marketing and presentation materials. FE has offices in the UK, Europe and across Asia Pacific. Its clients include life and pension providers, asset managers, financial advisers and networks, wrap platforms, fund supermarkets, software houses, and financial portals.
FE PR & Communications Manager
T / +44 207 534 7661
E / Claire.Lewis@financialexpress.net