Page 18 - DIY Investor Magazine | Issue 40

TOP OF THE POPS
April 2024 18
DIY Investor Magazine ·
The winners of the Investment Trust Ratings for 2024... By Thomas McMahon
Our ratings reward closed-ended funds which deliver attractive
They could be a good starting point for fund selection, although any selection process should include qualitative factors and and persistent performance in three categories which match up
changing macro conditions and correlations.
to broad goals investors have: long-term growth, income and
growth, and high current income.
This includes strong performance versus a fund’s underlying market, as well as attractive risk characteristics which suggests they could continue to be premium options for investors looking for active exposure.
Our ratings are purely quantitative, meaning the largest asset managers and boutiques are treated alike, and no commercial interests can interfere. In fact, only 56% of the trusts winning ratings this year are clients of ours, down from 59% last year. Quant ratings are of necessity backward-looking, and tell us what has happened not what will happen. But we have tried
to build in risk metrics to the calculations which may be more stable than alpha, as even for the best managers alpha is likely to be cyclical (see the full methodology here >)
Our ratings use benchmarks specific to the style of the manager. This means we are less likely to reward a manager when his or her style is in favour, but equally, we may be rewarding performance in a style which is on the verge of a rough patch.
This means our ratings provide a palette of funds with different styles and strategies, all with a proven track record of strong risk-adjusted performance and a stable management team.
‘TO REWARD CLOSED-ENDED FUNDS WHICH DELIVER ATTRACTIVE AND PERSISTENT PERFORMANCE CHARACTERISTICS IN THREE CATEGORIES’
‘A NUMBER OF INCOME-FOCUSSED FUNDS HAVE DONE VERY WELL IN TOTAL RETURN TERMS, PERHAPS BOOSTED BY STRONG PERFORMANCE’ FROM VALUE STOCKS’
2024 GROWTH RATED FUNDS
Our ratings look over five years, to give a decent amount of time for a track record to build up and allow us to assess a fund’s performance in different market environments.
The five years to the end of December 2023 saw a strong rally in growth in 2019, in tech, e-commerce and China in 2020 and then a surge in value over growth in 2021 and 2022, initially in a rising market and then a terrible 2022.
Last year, meanwhile, saw choppy style performance, with many markets ending, and looking cheap by historical standards, with the most glaring exception being US large-cap tech.
One of the interesting features of this year’s list of funds is the number of income-focussed funds that have done very well in total return terms, perhaps boosted by strong performance from value stocks at times.
This includes Dunedin Income Growth (DIG) and Murray Income Trust (MUT) as well as JPMorgan Global Emerging Markets Income (JEMI). However, overall, there is a broad stylistic spread of funds, as the below table shows.