Using the Lipper Leaders scoring system to analyse the best performing funds in the Investment Association Mixed Investment 20-60% sector
The Mixed Investment 20-60% Shares sector is every bit as racy as its name suggests, offering a middle ground between the lower-risk 0-35% Shares and the relatively high-octane 40-85% Shares sectors.
Demonstrating that UK investors are perfectly happy to mess with Mr In-Between, irrespective of Johnny Mercer’s advice, the sector led mixed-assets fund flows over the past year.
Three-year average returns are 8.2% and 2.6% over 12 months. While that’s not shooting the lights out, two-thirds of funds are in positive territory on a one-year view, and the maximum loss over that period is -7.2%, with an average loss of funds in negative territory over that period of -2.1%. Given the tumultuous year, that’s perhaps not too bad a result.
Eight out of the funds in Table 1 score a 5 for Lipper Leaders’ consistent five-year return—the highest possible. The other two are a 4. It’s interesting to compare this with the Target Absolute Return sector; a past favourite with investors, which is also dominated by multi-asset funds. We covered this covered back in November, when the top-10 performers’ table had only one fund scoring 5.
Punchy and Sustainable
The top-performer over three years is the Royal London Sustainable Diversified Trust. It’s consistently held close to 60% of its assets in equities, which puts it at the punchy end of the spectrum, and has a strong tilt towards UK assets, with pretty much everything else being invested in other developed markets. Plus, portfolio analysis shows its fixed income exposure is investment grade. So, it’s unlikely to be getting the return kicker from exotic and riskier plays. With a total expense ratio (TER) of 1.52%, it’s slightly more expensive than the sector average (1.35%), but investors are getting a good bang for their buck so far.
The other thing of note is that it’s an ethical fund—something it has in common with two other funds in the top 10—second place Liontrust Sustainable Future Defensive Managed and fund of funds 7IM Sustainable Balance, at number five.
ESG Popularity
Funds claiming a focus on environmental, social, and governance factors (ESG) are becoming ever-more popular among mixed-asset investors, with ESG dominating asset gathering in this part of the market last year. And, within mixed-asset ESG investing, Royal London and Liontrust are the dominant players.
There is a mixture of investment structures, from portfolios investing in individual securities, as with Liontrust and Royal London, to funds of funds. Some of the latter have a diverse range of holdings, while others hold only indexed products such as ETFs. The Barclays and Vanguard funds are examples of the latter—with Vanguard being cheapest in the sector, with a TER of 0.22%. With a range of equity weightings and structures in the table, there’s no clear single approach driving performance. However, “regular” funds are a nose ahead in performance terms over three years when compared to funds of funds: 9.2% versus 7.9%.
Table 1: Lipper Leaders – Top-performing IA Mixed Investment 20-60% funds over three years, with Lipper Leader five-year scores
All data as of January 31, 2021; Lipper Leaders scores all over five years; calculations in GBP, all funds with a minimum five-year history
Source: Refinitiv Lipper
This article first appeared in the March edition of MoneyFacts magazine, page 20
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The views expressed are the views of the author and not necessarily those of Refinitiv. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.
