Ethical and sustainable funds rank among the best performers in the latest rebalance of the Crown Ratings, published today by global fund data and technology specialist, FE fundinfo.
With 17 funds gaining the highest 5-Crown rating, BNY Mellon’s Sustainable Global Equity and Sustainable Real Return, Jupiter’s Global Sustainable Equities and Montanaro’s World funds have all achieved the highest status at the first time of asking.
Charles Younes, research manager at FE Investments, said: “The strong performance of sustainably-focused funds has largely come about from a combination of favourable market conditions and growing interest in ESG investing from both investors, who are looking beyond returns and wanting to know where their money is going, and institutions and fund groups who are looking to diversify their propositions."
FE fundinfo Crown ratings are calculated by building up a ‘crown score’. The score is made up of three parts, with each part calculated by reference to a fund benchmark. Once the benchmark is assigned, FE fundinfo applies three tests: an alpha based test, a volatility score and a consistency score) to the total return history of the fund. Three years of history is required to carry out these scores, so any fund with less history than this will not qualify for a rating.
Funds are assigned ratings based on their total scores, according to the following distribution:
- the top 10% - 5 FE fundinfo Crowns
- the next 15% - 4 FE fundinfo Crowns
- the next 25% - 3 FE fundinfo Crowns
- the next 25% - 2 FE fundinfo Crowns
- the bottom 25% - 1 FE fundinfo Crown
The total number of funds with the highest 5-Crown rating now stands at 397 in this rebalance, with 15 of these gaining the status for the first time and a further 9 moving from the lowest 1-Crown to the highest level.
Meanwhile the impact of the market rotation from growth into value strategies throughout 2021 has seen 125 funds losing their 5-Crown rating. This includes six funds from Liontrust and five from Baillie Gifford (both star performers in the January rebalance).
Among the sectors, the bond markets have performed especialy well over the past six months, with the IA Global EM Bonds sector seeing nine out of its 31 funds (29 percent) gaining a 5-Crown rating, while the IA Global Government bond (25 percent) and the IA USD Corporate Bonds (20 percent) and IA USD High Yield Bonds (20 percent) also saw many of their funds become 5-Crown rated as well.
At the other end of the spectrum, the Crowns rebalance reveals that income strategies continue to struggle. Among the worst performers were the IA UK Equity Income sector with just 5 percent of its funds gaining the highest rating and the IA Global Equity Income sector with 4 percent. The IA North American Smaller Companies sector, which was the previous best performing in January, has also fallen significantly from having 30 percent of its funds 5-Crown rated in January, to just 10 percent in July.
Across the different groups, ABRDN had the highest number of 5-Crown rated funds within its stable at 16, followed by BlackRock and Liontrust with 13 each and Fidelity with 12.
Mr Younes added: “Crown ratings offer investors an opportunity to compare and contrast the performance of a fund over an extended period of time and throughout different market conditions. Over the past 18 months as the Covid-19 pandemic has caused extreme volatility in the markets, the Crown ratings provide a transparent and in-depth quantitative analysis of the global funds market.
