View more on these topics

Is bigger better? Fund sizes and their performance

Does the size of a fund and its performance correlate? Here is a closer look at Investment Association sectors

If you were to shop for a loaf of bread at a local corner shop rather than  a supermarket, it would be logical to think a lack of choices would see sales of certain brands dominate, whereas in the supermarket where your options are expanded, it would be more evenly distributed. But can we apply this same argument to mutual funds? Should we expect to see sectors with limited choice have a few funds hoovering up most of the total assets under management?

To test this hypothesis, it is pertinent to choose a mutual funds universe that is split into sectors.

We have selected the Investment Association universe and leveraged FE’s data to compare the top 10 individual fund sizes against the total size of the sector. In addition, we have avoided either those with non-like-for-like instruments, such as the IA Specialist, or those whose number of funds are so constrained it would be foolish to attempt to interpret the results.

For equity instruments, there is a positive correlation. It appears that the greater the offerings a sector has available, the less likely it is for a few funds to dominate assets.

In this exercise, IA Global had the most diverse spread of assets, with Fundsmith Equity controlling just under 9 per cent of total assets.

Conversely, IA Europe Smaller Companies ended up being the most skewed, with soft-closed Barings Europe Select Trust representing a huge 23 per cent of the sector AUM.

Money Marketing launches DFM Centre

It was interesting to observe this correlation breakdown for non-pure equity sectors. For example, IA Absolute Return contains both a similar amount of funds and total AUM size to the Emerging Markets bucket, but just 10 absolute return funds hold 64 per cent of total assets – significantly more than EM.

Within the Sterling Bond space, Pimco dominates. Pimco GIS Income alone accounts for 44 per cent of total AUM for the IA Sterling Strategic Bond sector.

Overall, a few observations could also be made looking at the data. Those funds which have risen to the top in terms of size were not purely large fund houses backed by strong marketing.

Unsurprisingly, most of the active equity funds with the largest assets tended to historically outperform sector peers over the long term.

However, not all could be linked purely to performance. For example, Robeco QI Emerging Conservative Equities, a fund which invests in low-volatile stocks to reduce downside risk, is the third-largest EM fund.

Thematic funds proved popular with investors, as Pictet Global Megatrend and five-crown-rated Pictet Water both appeared in the top 10 largest funds within IA Global.

Finally, passives had a strong presence across most sectors. For example, the IA UK All Companies 6/10 largest funds were either index funds or trackers and, between them, represented £68bn of assets within this space.

Ahmed Mohamoud is research assistant at FE


Lloyds and Schroders advice venture names exec team

Lloyds Bank and Schroders have appointed a nine-person executive team under incoming chief executive James Rainbow for their advice joint venture, Schroders Personal Wealth. Rainbow’s position, along with that of Scottish Widows chief executive Antonio Lorenzo as chair, were revealed last October. The executive team are internal hires from the two companies: Executive Former position […]

Platforum: Segmentation is not a dirty word

Too many advisers are overlooking the benefits and those that are doing it aren’t in the most effective – and regulatory sound – way A few years ago, we asked platforms to define their target markets.  Several came back with vague, catch-all statements such as “any clients with portfolios between £25,000 and £10m”. Hardly helpful. […]


Quilter to add 400 advisers with Lighthouse acquisition

Quilter is set to grow its adviser base by another 400 advisers after agreeing a deal to buy national firm Lighthouse for £46.2m. Quilter’s network Intrinsic already has 3,500 avdvisers, including 1,600 restricted financial planners, and it is also the parent company of national Quilter Private Client Advisers. In a stock exchange announcment this morning […]

Global growth forecast cut to lowest level since crisis

Trade tensions, rising debt levels and the threat of a mismanaged Brexit have all led the International Monetary Fund to cut its forecast for global growth to its joint lowest level since the financial crisis. The Times reports that the world growth estimate for 2019 is now 3.3 per cent, down from the 3.5 per […]

Seeking quality in uncertain markets

By Ewan McAlpine, Senior Client Portfolio Manager In uncertain times, investors naturally seek safety. But in fixed income markets, what does that really mean? Ewan McAlpine outlines the approach RLAM’s Fixed Income Team will be adopting across its credit funds in response to potentially volatile markets this year. Click here for full article


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm