The Artemis Income and Invesco Perpetual Income and Growth funds are among those that have been ditched from the FE Invest Approved funds list and its Model Portfolio Service.
The research house has released details of the manager switches of the 130 passive and active funds on its approved list for the first time, saying it got rid of larger funds and has brought in more nimble alternatives.
The Artemis Income fund was cut due to its “average returns” while Invesco had a “lack of differentiation” compared to its peers.
Also up for the chop was the Axa Framlington UK Select Opportunities fund, thanks to poor performance. The fund was downgraded from five FE crowns to four.
“The Axa fund suffered in the first half of 2014 due to the market rotation from medium-sized growth companies to large value stocks. The performance had a small rebound in the first half of 2015 but we lost confidence in the manager’s capacity to rebound,” says Charles Younes, analyst at FE.
Other large funds that were cut were the Jupiter European Special Situations fund and the Schroder UK Dynamic Smaller Companies fund.
The Schroder fund’s size in particular was mentioned as the reason for a dop in performance.
“The fund struggled when it became too large, causing a dip in performance, Since then it has slimmed down although the FE research team are unconvinced that the management team have put steps in place to prevent the same mistakes happening again,” says FE.
Replacing these funds are “more aggresive” funds, including the Old Mutual UK Dynamic Equity fund and the Standard Life Investments UK Equity Unconstrained fund.
The Old Mutual fund’s ability to be both long and short means it has performed well in both up and down markets, says FE.
Overall, the FE team says it is ready to put more risk on the table after the China fallout, and a previous defensive portfolio position.
“At this rebalancing we’re putting some risk back on the table; we don’t think that now is the time to be going defensive, the horse has already bolted,” says Rob Gleeson, head of FE research.
“We have moved to soften our defensive stance. Primarily this means further reducing bond exposure in favour of equities where appropriate. This is as much to manage downside risk as to enhance growth potential.”