Page 19 - DIY Investor Magazine | Issue 40

Our Growth / Value Scores and Quality Scores are derived from
2024 INCOME & GROWTH RATED FUNDS
underlying Morningstar data on which we have performed some
calculations to try to build a picture of how funds compare. Both
A striking feature of the Income & Growth Rated Funds this year scores are relative, but relative to the underlying universe of
is the number of small and mid-cap-focussed funds. These funds, i.e. all funds scored, not just the ratings winners.
ratings first apply the same filters as for the growth ratings, and
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April 2024
DIY Investor Magazine ·
As such, we think the broad spread of Growth (high) versus Value (low) scores is interesting, and suggests we are managing to reward alpha rather than style bias. We do think, however, that strong total returns from equity income funds could be a feature of the coming years, as we discussed in
a recent strategy note. Low starting valuations, meaning high yields, and a higher interest rate environment could be creating a good setup for the strategy.
then look at income.
‘A STRIKING FEATURE OF THE INCOME & GROWTH RATED FUNDS THIS YEAR IS THE NUMBER OF SMALL AND MID-CAP- FOCUSSED FUNDS’
It is the 3% initial yield filter which has seen a number of SMID- cap funds qualify this year. Rock-bottom valuations, particularly in the UK, have created a really interesting opportunity. While a fund like Schroder UK Mid Cap (SCP) is obviously interesting as a long-term growth play – the FTSE 250 has historically been one of the best-performing growth markets – at the time of writing you can buy the shares on a 3% yield. For both classes of investors referred to above, this seems pretty exciting. Similar arguments could be made for Mercantile (MRC) and Schroder Oriental Income (SOI).
There’s more of a value bias to the above list, as you would expect from a list of income funds, but there are a number with a decent growth bias too. Notable are JPMorgan China Growth & Income (JCGI) and JPMorgan Global Growth & Income (JGGI).
One trust worth highlighting in the above list is Ashoka India Equity (AIE). This is the first year AIE has had a track record long enough to be rated, and it shot to the top of the rankings.
While India has had a strong run, that is largely irrelevant to the rating, which is due to the trust’s outstanding active record.
Our growth ratings are based on the information ratio and the upside/ downside capture ratio, and on both metrics, AIE has scored very well.