Majedie UK Income has been cut from FE’s approved funds list following changes to the fund’s process.
FE rebalances its Invest Approved List twice yearly, with eight new funds joining the list and 12 leaving in the latest changes.
Charles Younes, research manager at FE, says they have “lost conviction” in the £941m Majedie UK Income fund.
“Following a difficult period around the Brexit vote, the manager has significantly changed the process of the fund to the extent that we believe our reasons for holding the fund are no longer valid. We have lost our conviction in the fund and there are strong alternatives in the UK Equity Income space.”
Speaking on the fund’s five-year anniversary in January, lead manager of the Majedie UK Income fund Chris Reid said: “We do have some ground to make up on 2016 but many of the businesses in which we are invested are emerging from a volatile period in even better shape. We will continue to look for companies that are improving, particularly in unfashionable or more controversial areas of the market.”
The £636m Liontrust UK Smaller Companies fund was also dropped from the list in favour of the “significantly smaller” Liontrust UK Micro Cap fund.
Thomas McMahon, senior analyst at FE, says: “We have long admired this fund and its growth in assets under management is not only a tribute to the managers’ success but illustrates that many others share our view.
“We have, however, become concerned that the fund is now too large to be able to implement its strategy so are uncertain how it will perform in future. We see the significantly smaller Liontrust UK Micro Cap fund as better able to recreate the success of the Smaller Companies fund, which was built on investing in the lowest market cap companies early in their lives.”
Overall, FE has added funds “that could help investors protect capital from unpredictable markets and increase portfolio diversification”. Three funds have been added for their low risk, low return profile: Blackrock Absolute Return Bond, Premier Defensive Growth and Standard Life Short Duration Credit.
Rob Gleeson, head of FE fund research says: “Our September rebalance took place in the aftermath of the UK’s decision to leave the EU. The subsequent six months have been no less dramatic, with the election of Donald Trump to the US presidency. With further significant elections on the horizon and a wave of populism sweeping across the West, 2017 could be just as dramatic, and that’s before we have even worked out what Brexit and a Trump presidency mean.
“In light of all this we believe that markets will be extremely difficult to predict and it is important that investors remain as diversified as possible in order not to be caught out.”