Investment Week picks out the best of the largest unit trusts/OEICs in the IA universe.
M&G Optimal Income
Managed by Richard Woolnough; AUM: £22.3bn
Fundsmith Equity
Managed by Terry Smuth; AUM: £17bn
Standard Life Investments GARS
Managed by the multi-asset investing team (led by Guy Stern); AUM: £16.2bn
Invesco Perpetual Global Targeted Returns
Managed by David Millar (pictured), Dave Jubb, Richard Batty and Gwilym Satchell; AUM: £12.7bn
Newton Real Return
Managed by Iain Stewart (pictured), Suzanne Hutchins and Aron Pataki; AUM: £10.4bn
Invesco Perpetual High Income
Managed by Mark Barnett; AUM: £9.2bn
Stewart Investors Asia Pacific Leaders
Managed by David Gait (pictured) and Sashi Reddy; AUM: £8.2bn
Baillie Gifford Diversified Growth
Managed by Scott Lothian (pictured), Patrick Edwardson, David McIntyre, James Squires and Felix Amoako; AUM: £6.9bn
M&G Global Dividend
Managed by Richard Woolnough; AUM: £6.3bn
Artemis Income
Managed by (left to right) Adrian Frost, Nick Shenton and Andy Marsh; AUM: £6.1bn
Jupiter European
Managed by Alexander Darwall; AUM: £6bn
LF Lindsell Train UK Equity
Managed by Nick Train; AUM: £5.8bn
LF Woodford Equity Income
Managed by Neil Woodford; AUM: £5.6bn
Newton Global Income
Managed by Nick Clay; AUM: £5.5bn
M&G Optimal Income, Standard Life Investments GARS and Fundsmith Equity are among the biggest unit trusts and OEICs in the Investment Association universe. But what does this mean for those invested in them? Lauren Mason finds out.
M&G Optimal Income, Standard Life Investments GARS and Fundsmith Equity are among the biggest unit trusts and OEICs in the Investment Association universe. But what does this mean for those invested in them? Lauren Mason finds out
One of the most basic pieces of information on every fund's factsheet is its assets under management (AUM), but deciding whether the fund is a 'good size' or not can be a moot point.
If a fund is too small, the cost of running it can eat into returns while, if a fund is too large, it can lose flexibility and liquidity.
According to our research using FE data, out of 3,239 unit trusts and OEICs sitting in the major equity, fixed interest and multi-asset sectors (including IA Unclassified), 319 (or 9.8%) are more than £1bn in size. At the other end of the scale, 1,230 (or 38%) are less than £100m, despite recent pressures for groups to rationalise fund ranges.
Simon Evan-Cook, senior investment manager at Premier Asset Management, said deciding on the right size for a fund
is difficult.
"For any given fund, it depends on a host of different factors such as asset class, market-cap focus and the manager's investment style," he said.
Ryan Hughes, head of active portfolios at AJ Bell, said a large AUM could be detrimental to mid- and small-cap equity funds, for example, because they become unable to get exposure to the stocks they want, in the quantity needed.
"It is also possible that large AUMs can be challenging for fixed interest," he added. "This is because those funds end up becoming more and more invested in synthetic bonds or derivatives as they are unable to get sufficient quantities of the bonds they want to buy."
Effect on performance
So what impact has increasing fund size had on performance? The biggest strategy on the list is Richard Woolnough's M&G Optimal Income fund which, despite its £22.3bn AUM, has outperformed its average peer in the IA Sterling Strategic Bond sector over one, three, five and ten years.
M&G sees record inflows as asset manager plans to demerge from Prudential
In fact, out of the eight actively-managed funds on the list with five-year track records, and which sit in single asset class sectors, six have beaten their sector averages over this time frame.
We also included Stewart Investors Asia Pacific Leaders in the table (below) because, even though the fund resides in the IA Specialist sector, its performance is easily benchmarked against the MSCI AC Asia Pacific ex Japan index.
