Methodology
The Asset Allocator 100 Club enables mutual funds and investment trusts to compete for membership, with trusts’ share price total returns considered.
It also includes a selection of the best passive investment providers, giving asset allocators insight into which funds are genuinely performing above and beyond the pack.
The calculation process is based on funds’ total returns over one and five years relative to the total returns of a broadly relevant benchmark index or sector.
The benchmark is chosen so a large group of funds can be reasonably compared with it. The data source is FE Analytics, and all performance figures quoted are bid-to-bid and rebased in sterling where necessary. The performance figures are to April 22, 2024.
Candidate funds are ranked by their outperformance of a relevant benchmark in the year to April 22, 2024. Then, potential 100 Club members are screened to ensure they delivered strong five-year returns.
A fund must have put a double-digit gap – 10 percentage points or more – between its performance and that of its index in the past five years for it to convince us it has long-term staying power.
We expect it to deliver at least half that level of outperformance over one year – 5 percentage points or more for equity funds – to ensure it has delivered the kind of elite returns that would place it in our annual club of 100 funds.
Sometimes it is impossible to find funds in a sector that outperform by this demanding margin of 5 and 10 percentage points, so we narrow the margin proportionally – to 4 and 8, then 3 and 6 and so forth. Funds that underperformed the relevant benchmark over either one or five years are never included.
The only exception to this methodology is absolute return funds. Here, we look for funds that have provided a return of more than zero in each of the past five 12-month periods.
If fewer than five funds achieve this, we remove the most distant 12-month period. In the event that we must eliminate a fund, we do so by adding further 12-month periods.
Candidate funds are then further screened to exclude the following, in order to ensure relevance to DFMs:
- Fund manager tenure less than three years.
- Mutual funds with less than £50m, trusts with a market cap below £100m (market capitalisation as at April 25 2023).
- Enhanced index or other ‘passive-plus’ funds.
- Products that are not UK authorised or available for distribution to retail investors, or funds that have an excessively selective distribution policy.
- Funds that are run as a segregated mandate for a specific financial advice or wealth management business are not included.
- Repeat funds from the same fund manager. If a fund manager qualifies more than once in any one category, the best-performing product gains entry.
- Hard-closed funds, and funds earmarked for closure at the time of calculation, are disqualified to ensure membership is relevant to fund buyers.
- Funds with no sterling share class.
- Funds that fail to make basic information such as performance, minimum investment, tenure, how to invest etc available to data providers and the public.
To screen out absolute return funds with excessive long-only risk, funds with a rolling three-year month-end maximum drawdown of greater than 8 per cent are excluded.
When the best funds have achieved Asset Allocator 100 Club membership, the five large and mid-to-small investment managers with the most Club member funds enter two provider categories.
Where managers have an equal number of funds, the relative one-year outperformance of the investment manager’s member funds breaks the tie.
A large investment manager is defined as having at least £100bn in global assets, including the assets of its parent group.
