Royal London Sustainable Diversified Trust is one of the cautious multi-assets funds that have thrived thanks to manager skill, research by Trustnet suggests.
In this series, Trustnet is looking for funds that have consistently had the highest information ratios – a metric that is used to determine when returns are down to skill rather than luck – and this article focuses on the IA Mixed Investment 20-60% Shares sector.
The information ratio is used to evaluate the performance of an investment portfolio. It’s a risk-adjusted measure is designed to reflect the skill of a fund manager in generating excess returns relative to a benchmark.
The ratio is calculated by taking the portfolio's active return (the difference between the portfolio return and the benchmark return) and dividing it by the tracking error, which is the standard deviation of the active return. A higher ratio indicates a better risk-adjusted performance.
Using the average fund as the benchmark, Trustnet ran the information ratio of each IA Mixed Investment 20-60% Shares fund over the past 10 full calendar years as well as over 2023 to the end of May, then sorted them by quartile to see which have spent the most time at the top of the sector for this measure.
Performance of Royal London Sustainable Diversified Trust since start of 2013
Source: FE Analytics. Total return between 1 Jan 2013 and 31 May 2023
Coming out on top was the £3.3bn Royal London Sustainable Diversified Trust – it has posted a top-quartile information ratio in nine of the 11 periods examined by this research. Furthermore, it’s 115.2% total return over the period under consideration is the highest of the 93 funds in the IA Mixed Investment 20-60% Shares sector.
Run by FE Alpha Manager Mike Fox, George Crowdy and Sebastien Beguelin, the process behind the fund filters out businesses with exposure to negative issues or controversial products then looks for those that are actively working to contribute to a more sustainable society.
Analysts at Rayner Spencer Mills Research said: “Overall, we believe this is a strong proposition, employing a longstanding and proven sustainable investment process with a well-resourced internal team.
“They should be capable of continuing to deliver competitive risk adjusted returns whilst focusing on investments which are helping to make a positive change to society and the environment.”
Source: FinXL
Another five funds have been in the top quartile for the information ratio in more than half of the 11 periods we looked at in this research.
All of these funds are also in the top quartile of the IA Mixed Investment 20-60% Shares sector for total return over the period examined in this research (1 January 2013 to 31 May 2023).
Artemis Monthly Distribution has the next best track record, sitting in the top quartile for information ratio in seven of the 11 periods. It is fourth quartile for this metric over the year to date, however.
It has four managers - Jacob de Tusch-Lec (who has worked on the fund since 2012) and James Davidson run its equities allocation, while David Ennett and Jack Holmes look after the bonds.
The other funds making the shortlist - abrdn Multi Manager Multi Asset Distribution Portfolio, M&G Episode Income, Premier Miton Multi-Asset Monthly Income and WS Verbatim Multi-Index Portfolio 4 – all posted top-quartile information ratios in six of the 11 periods reviewed.