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Increase in number of specialist sector funds launched in Q1, as industry prepares for post RDR world

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25/07/2012
A third of all new funds launched at the beginning of this year are tailored to suit the needs of investors in the post-RDR investment world.

A recent study shows that a third of all new funds launched in the first quarter of 2012 were in the IMA’s specialist funds sector, reflecting how product providers are continuing to evolve their businesses to suit the needs of investors post the implementation of the retail distribution review (RDR).

According to FundWatch, a quarterly analysis of the retail fund landscape, 18 new funds were launched into the UK market in Q1 2012, a 43.75% drop against the 32 launched in the previous quarter, and a return to the more normalised levels shown from previous quarters.

The specialist sector saw the most number of fund launches of all the IMA sectors, with six funds launched in Q1.

The specialist sector is generally focused on a wide variety of areas including global infrastructure, agriculture, Latin America, resources, Russia, corporate debt, Europe, India, commodities, China and the emerging Middle East.

Gary Potter, co‐head of the F&C Thames River Multi‐Capital team, said: “With too many funds in the market for investors to choose from already, it is pleasing to see a drop-off in the number of funds launched to UK investors in Q1.

“What FundWatch does show is an increasing number of funds being launched in the specialist fund sector, which are funds that cannot be accommodated by mainstream sectors, including risk rated funds, which are becoming increasingly popular with advisers looking for solutions to efficiently classify risk for their clients. This is a trend we expect to continue over the next quarter as the deadline for RDR implementation looms near.”

The survey also revealed the eight sectors which made positive ground in Q2 2012. The best performer of the quarter was the IMA UK Gilt sector, which gained 3.6%, followed closely by the IMA Sterling Corporate Bond sector, which rose by 1.12%.

However, in contrast to the previous quarter, IMA Technology & Telecoms sector was the worst performer, falling 8.87%, having been the top performer in Q1 2012.

The survey also highlighted the proportion of funds in the main 12 IMA sectors that have performed consistently above average in each of the last three 12 month periods.

 

Over a three-year period until the end of Q2 2012, 180 of a possible 1,237 (14.55%) funds delivered above median returns.

The most consistent sector for the more challenging hurdle of top quartile returns remained the IMA Global Emerging Markets sector with the IMA UK Equity Income sector being the second most consistent area.

The least consistent sectors, in terms of achieving top quartile returns over three discrete years, were the IMA Global Bond and £ Sterling Strategic Bond sectors.

Additional survey findings include:

• The best performing fund in the second quarter of 2012 was the Baillie Gifford Active Long Gilt Plus fund. With investors taking a step back from the “risk on trade” that had driven markets for Q4 2011 and Q1 2012, Gilts benefited from a rush to safe haven assets with the 10 year Gilt yield falling to a record 300 year low of 1.52%. The fund was well placed to benefit from this move.

• The highest peer group ranking over Q2, of those funds launched in Q1 2012, goes to the Standard Life Global Smaller Companies fund at 5th percentile within the IMA Global sector. In absolute terms the fund lost 0.54% of its value.

• Volatility returned to currency markets in the quarter with the Yen reversing the move of the previous quarter by rising 5.1% against Sterling, having at one point gained nearly 10%.

• The TRMC consistency ratio for top quartile returns over three years (to the end of Q2 2012) remained stable at 2.99% (2.62% last time) with 37 of 1,237 funds achieving this feat.

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