Market volatility drives down fund performance consistency, says F&C survey

Funds achieving top quartile and above median returns over three years fell in Q2 2013 due to recent market volatility, according to the latest FundWatch survey from F&C Investments’ multi-manager team.

According to the F&C Consistency Ratio, just 25 of 1221 (2.05%) funds in the 12 main IMA sectors were top quartile in each of the last three 12 month periods as at the end of Q2 2013.

This marked a notable decline on the Q1 survey 2013 when 4.56% funds achieved this feat. Of the 12 IMA sectors, four of them recorded no consistent funds and the IMA Global Emerging Markets sector was the most consistent sector, with 9% making the grade. However, this was a decline on Q4 2012 and Q1 2013 when 17% and 11% funds in the sector respectively recorded this.

Lowering the hurdle rate to above median returns in each of the last three 12 month periods saw just 11.79% of funds making the grade. This is compared to 16.52% in Q1 2013.

The survey also found Q2 2013 brought with it a more mixed picture in terms of sector performance. Despite a sell-off in the final month, the IMA Japan sector was the best performing sector of the quarter following a positive run in the early part of the quarter.

The slowdown in China meant the IMA Global Emerging Markets sector was the worst performer, falling 8.5%. This was closely followed by the IMA Specialist sector, falling 7%, due to its commodity heavy constituents. All bond sectors fell in the quarter, with the IMA Mixed Investment 0-35% Shares sector also suffering due to its likely bond exposure.

Rob Burdett, co-head of multi-manager at F&C Investments, commented: “After a significant jump in top quartile consistency in the first quarter of this year, Q2 2013 saw a lurch back to the bottom end of the historic range of between 2 and 4%. The average overall was bumped up by the small IMA Global Emerging Markets sector, where four of its 46 constituents achieved consistency; however, three of these were First State Emerging mandates and therefore linked. Consistency, it would seem, is as hard as ever to find.”

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