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UK All Companies funds the most consistent, says F&C

Cherry Reynard
Written By:
Cherry Reynard

The top funds in the UK All Companies sector have tended to remain consistent over the last three years, more so than in any other sector.

According to the F&C Multi-Manager team’s latest FundWatch survey the UK All Companies sector saw 4.7% of funds achieve top quartile returns (i.e. were in the top 25% of funds for returns) consistently over the last three years (from July 2011 to June 2014). It was closely followed by the IMA Japan sector which saw 4.3% of funds make the grade.

The broader market context however remains challenging, with only 25 of 1,086 funds achieving top quartile returns, close to the bottom of the historic range for the F&C MM consistency ratio, at 2.3%.

The survey also revealed that few bond funds have been able to adapt to changing market conditions and beat peers on a regular basis. Neither the IMA Global Bonds nor the IMA £ Strategic Bond sectors had any funds performing consistently in the top quartile range over the last three years.

However, in the second quarter of 2014 (April 2014 – June 2014) most sectors did make positive returns, with all IMA bond sectors posting positive returns over the quarter. The IMA £ High Yield sector made further gains with a return of 2.1%. Despite gaining 0.3%, its Dollar exposure meant the IMA Global Bonds sector was the worst performer within fixed income.

The IMA Global Emerging Markets sector was the strongest performer of the 37 IMA sectors in the second quarter, following a change in the political landscape. The IMA Global Emerging Markets sector returned +4.9% over the quarter in contrast to -2.4% in Q1 2014. The positive performance was not confined to equities; the IMA Global Emerging Markets Bond sector was the top performing fixed income sector, rising 2.3%.

The IMA UK Smaller Companies sector was the weakest performing sector in the quarter, as investors rotated out of a perceived expensive area of the market.

Rob Burdett, co-head of multi-manager at F&C Investments commented: “The UK All Companies sector is one of the most popular amongst the UK investor community, so it is very pleasing to see it topping the leader board overall. Beyond this, it would seem the East is best for above average consistency with the Japan, Asia Pacific ex-Japan and Emerging Markets sectors offering the most funds with above median performance over the last three years.”

“Looking at the second quarter figures, and contrasting against the previous four quarters of negative returns, we saw a change in fortune for emerging markets for the better. It will be interesting to see if this is the beginning of a broader positive trend for the IMA Global Emerging Markets sector after several years of being out of favour.”

“Small caps have outperformed over the previous year, and played a crucial role in the broader market recovery. However the recent investor rotation out of small caps, whilst understandable, overlooks the fact that most companies in this sector are still operationally strong and doing well.”

The F&C MM consistency ratio is a review of the 12 major market sectors, highlighting those funds that are consistently above average in each of the last three years, and those consistently top quartile.