Discretionary managers underperformed retail multi-asset funds in the third quarter of 2013, according the latest figures from the Asset Risk Consultants (Arc).
The Arc data, which is based on the performance figures for bespoke portfolios sent to them by 53 participating wealth managers, found that only defensive portfolios outperformed their open-ended fund peers in the past three months.
The Arc Sterling Cautious Private Client Index (PCI), which comprises the average return of all funds with a risk level of between 0 per cent and 40 per cent of world equities, went up by 1.4 per cent in the quarter.
By contrast, the average total return from the IMA Mixed Investment 0-35% Shares sector in the period was 1.2 per cent, according to data from FE Analytics.
On a quarter-by-quarter basis however, the Arc Sterling Cautious PCI has significant improved. The second quarter of 2013 saw defensive portfolios lose 1.55 per cent – a significant fall from grace when compared with the first quarter return of 4.1 per cent.
The other three multi-asset IMA sectors all outperformed the corresponding Arc indices during the past quarter, with the biggest outperformance coming from funds within the IMA Mixed Investment 40-85% Shares sector, which beat the Arc Sterling Steady Growth PCI by 0.7 percentage points.
The Arc Sterling Steady Growth PCI is estimated to have returned 9.3 per cent so far in 2013, having had a very strong start to the year. In 2012, the index delivered 8.9 per cent, according to the Arc data.
So far this year, discretionary managers are beating multi-asset managers, with only the IMA Mixed Investment 40-85% Shares sector outperforming its Arc equivalent to date in spite of a weak third quarter for discretionary managers.
The Arc Sterling Equity Risk PCI, which comprises the average return of all funds with a risk level of between 80 and 110 per cent of world equities, went up by 2.9 per cent in the third quarter of 2013, a comeback from the 1.32 loss recorded last quarter. This index, which is the riskiest of the Arc PCIs, is currently estimated to have gained 11.4 per cent for 2013 so far.
According to Arc, the PCI indices provide an accurate reflection of the actual returns client should expect from discretionary managers based on their appetite for risk. The third-quarter data is based on estimates so far, with official figures for the quarter to be released next month.
This month’s data also showed more discretionary firms are looking to sign up to the Arc service, which provides confidential reports for members that sign up, with Ashcourt Rowan and Thomas Miller Investment contributing data for the first time.
Matthew Jeynes is senior reporter at Investment Adviser
