Gatekeeper selections and the top sectors of 2015

Gatekeeper selections and the top sectors of 2015

According to the Investment Association, the top sectors of 2015, by net sales, were UK Equity Income, Targeted Absolute Return and Europe ex-UK.  Fund groups lucky enough to have funds in these sectors will have had a good year, and if their funds were on any shortlists, they probably had a great year.  How much impact does being selected by a gatekeeper have on a fund’s fortunes? We ran our gatekeepers analysis to find out which funds had performed best and whether there was any correlation between performance and the number of selections they had attracted. All of the funds shown below are ranked on their three-year returns.  The tables below include a mix of the best funds by performance and the funds with the most gatekeeper selections. The ones with the  most gatekeepers usually attract the most flows.

UK Equity Income

We found that the best funds by performance in the UK Equity Income sector generally had far fewer fund selections than some of the more established names that immediately come to mind when we think of UK Equity Income funds.  The top five funds in this sector all have performance of 18%+ but with the exception of Marlborough Multi-Cap Income funds, their selections are in the single digits.  This is no surprise since they’re all from boutique fund managers, which find it harder to get on fund selectors’ radars.

The most popular by gatekeeper selections is the Artemis Income fund, but it’s ranked 43rd overall for returns over three years. Although a much larger fund group, Artemis has a boutique culture which gives fund managers free rein over their funds. The fund is run by the two Adrians who are very well regarded in the industry. Returns have been disappointing recently, but performance over the long term is good and is why the fund is featured on many gatekeeper lists. It’s followed by the Woodford Equity Income which does not  have a three-year track record as yet, but is riding on Woodford’s track record at Invesco Perpetual. Threadneedle UK Equity Income is third for gatekeeper selections and is ranked 22nd for performance, putting it in the top quartile.   

UK Equity Income

Rank
(3-yr rtn)
Fund3-yr return# Gatekeepers
1Miton UK Multi-Cap Income20.1%5
2Marlborough Multi-Cap Income19.2%10
3MFM Slater Income18.1%3
4Montanaro UK Income18.1%1
5Chelverton UK Equity Income18.0%6
-Woodford Equity Income-20
19Rathbone Income12.6%12
22Threadneedle UK Equity Income12.1%16
43Artemis Income10.2%21
55JOHCM UK Equity Income12.6%14

Targeted Absolute Return

In the Targeted Absolute Return sector there were three funds in the top ten by performance that had no gatekeeper selections at all.  These were the Odey Absolute Return,  the 7im Unconstrained and the RWC US Absolute Alpha.  Most of the top ten funds by three-year returns had few gatekeeper selections. The most popular was the Henderson UK Absolute Alpha fund with 10 selections, but the popular and well-established SL GARS and Newton Real Return funds in 20th and 27th places respectively had roughly twice the number of selections.

Targeted absolute return

Rank
(3-yr rtn)
Fund3-yr return# Gatekeepers
1City Financial Absolute Equity24.3%3
2Argonaut Absolute Return20.2%3
3Odey Absolute Return17.6%-
4Henderson European Absolute Return11.1%2
5Henderson UK Absolute Return10.1%10
6Old Mutual Global Equity Absolute Return9.8%7
77im Unconstrained8.6%-
9RWC US Absolute Alpha7.6%-
20Standard Life GARS4.4%17
27Newton Real Return3.5%17

Europe ex-UK

After a languishing in the doldrums, interest in the the Europe ex-UK sector has picked up thanks to a strong surge in performance.   Of the top five funds, only one (Jupiter European) has been selected by a sizeable number of gatekeepers. Most have just one gatekeeper under their belt. Scottish Widows stands out for having a couple of unsung heroes with exceptionally strong performance. They are HIFML funds which means they are distributed via the Halifax branch network and so are not on gatekeepers’ radars.

Apart from these funds, there’s a small clutch of funds that deserves to be selected but is not getting a look in with gatekeepers. One example is the Invesco Perpetual European Equity fund. The fund has improved considerably following performance issues in the past, but not enough to attract selectors’ attention.  The others are from both large and small providers, but perhaps what unites them is that they’re known for expertise in other sectors.

Europe ex-UK

Rank
(3-yr rtn)
Fund3-yr return# Gatekeepers
1Man GLG Continental Europe21.2%3
2Scottish Widows HIFML European Focus18.8%1
3Jupiter European17.0%21
4Scottish Widows HIFML European Strategic16.9%1
5IP European Opportunities16.5%1
10BlackRock Continental Europe13.2%17
11Invesco Perpetual European Equity14.7%-
16Stonehage European All Cap Equity13.5%-
18BlackRock European Dynamic13.2%13
20Barclays Europe (ex-UK) Alpha13.0%-
22Royal London European Growth12.7%-
25S&W European Equity12.2%-
30Henderson European Select Opportunities11.8%13
34Threadneedle European Select11.7%18

To conclude…

Performance alone does not get funds the sales they deserve.  As demonstrated above, the impact of gatekeepers on a fund’s fortunes can be considerable. There are several funds featured above that are punching well below their weight for a variety of reasons. A subscription to Fundscape’s Gatekeepers data package will help shed light on which lists fund groups should be targeting and how they’re performing compared to their rivals.  For more information, click here.