Blog View Page

Vintage highlights – extra profits for more relaxed investors

Posted by: Sam Lees
 
Ahead of our full Vintage update being published, we wanted to give you a preview of some of the results and the methodology.
 
Looking for a more relaxed investment approach? Our Dynamic Fund Ratings are pretty straight-forward, requiring about 30 minutes twice a year. However, some investors might want to just review once a year. For those more relaxed investors Vintage fund ratings are an ideal solution. Here we look at what a Vintage rating is, how a fund gets it and the key performance stats for a number of popular sectors.
 
Dynamic vs Vintage
 
As a refresher, Dynamic ratings are based on volumes of research going back to the 1930s that proves that the past is, in fact, an excellent guide to the future – it is called Momentum. But something was missing – all of that research was based on individual stocks.
 
What was needed was equivalent research on funds, and that is what we started almost 15 years ago. Our research confirmed what had gone before, but in the context of funds – that there was substantial extra growth by using a straightforward Momentum approach to fund selection.  
 
Today’s “winners” were defined by their performance over the last 6 months, again our unique research re-confirming with funds what others had uncovered in the context of individual stocks.
 
The features of those Dynamic Fund Ratings are:
  • Shorter term momentum
  • 6 monthly review periods
  • Likely high turnover of funds at those review points.
Using Dynamic Fund Ratings we don’t care if the fund manager is skilful or lucky - we just want to piggy-back their current form.
 
In contrast, the features of Vintage Fund Ratings are:
  • Longer term performance
  • Annual reviews
  • Lower turnover at review points
The consistency which derives from the Vintage ratings suggests the fund manager is more skilful than lucky. We’re looking back over 10 years and breaking down every 6-monthly period, analysing each one individually, and giving a greater weighting to the most recent performance.
 
In a nutshell, to achieve a Vintage rating a fund must be in:
  • top 40% of performers in its own sector
  • for 60% of the time in the last 10 years 
We didn’t think this was a demanding benchmark. But we found that 92% of funds failed to beat it – which is shocking. Nonetheless, it enabled us to identify the 8% which were doing rather well, with a high level of consistency.
 
No “Mates Rates”!
 
These rating systems are objective – not seat-of-pants. Nor are they based on the fund manager paying us for the rating, nor taking us out for long lunches.
 
It’s not fund recommendation by proclaiming "because I'm an expert". 
 
There is no scope for Vintage or Dynamic ratings to be skewed by fund managers with a good story or a big marketing budget.
 
The Numbers?
 
Vintage Ratings might be a simpler solution but that doesn’t mean the results are mediocre. 
 
Here we look at the performance of three different sectors, selecting the top 3 Vintage-rated funds from each sector from 2004, with a review every July. 
 
In the graphs below we show the Vintage performance (green line) compared to the sector average (grey line). Plus in the table under each graph we show you the volatility, by way of the Worst calendar month and the Worst calendar year for the 15-year period from July 2004 to July 2019. 
 
While you can’t “buy” the sector average it is a good way to illustrate how the Vintage Ratings compare to the average fund.
 
UK All Companies sector
 
The Vintage Portfolio outperforms the sector average by 144% over 15 years. 
 
That’s an extra 2.8% per year.
 
If you had invested £100,000 in July 2004 that would have grown to £442,750. 
 
£143,780 extra – compared to the sector average (£298,970).
 
And the volatility is only 2/3 that of the sector average. The worst month is 10.1% for the Vintage Portfolio compared with 15.2% for the sector average.
 
 
UK All Companies
       
 
Overall %
Annualised %
Worst Month %
Worst Year %
Vintage UK All Co’s Portfolio
342.8
10.4
-10.1
-21.4
UK All Companies Sector Avg
199.0
7.6
-15.2
-32.0
 
Mixed 20-60% Shares sector
 
The Vintage Portfolio outperforms the sector average by 55.9% over 15 years. 
 
That’s an extra 1.7% per year.
 
If you had invested £100,000 in July 2004 that would have grown to £262,820. 
 
£55,880 extra – compared to the sector average (£206,940).
 
And the volatility is lower. The worst month is 7% for the Vintage Portfolio compared with 8.6% for the sector average.
 
 
Mixed 20-60%
       
 
Overall %
Annualised %
Worst Month %
Worst Year %
Vintage Mixed 20-60% Portfolio
162.8
6.7
-7.0
-9.5
Mixed 20-60% Sector Avg
106.9
5.0
-8.6
-15.8
 
Global sector
 
The Vintage Portfolio outperforms the sector average by 89% over 15 years. 
 
That’s an extra 1.6% per year.
 
If you had invested £100,000 in July 2004 that would have grown to £437,080. 
 
£89,700 extra – compared to the sector average (£347,380).
 
The risk is a higher for the Global sector. The worst month is 16.1% for the Vintage Portfolio compared with 12.9% for the sector average. Do note this.
 
 
Global Sector
       
 
Overall %
Annualised %
Worst Month %
Worst Year %
Vintage Global Portfolio
337.1
10.3
-16.1
-29.4
Global Sector Avg
247.4
8.7
-12.9
-24.3
 
Vintage fund ratings are a great resource for investors that don’t want to review every 6 months, and you can see from these numbers that the results are impressive.
 
But remember, you shouldn’t adopt a “buy-and-forget” approach with these funds (or any of your investments) because inertia is one of biggest roadblocks to you making best possible gains.
 
Do get in touch with your feedback and let us know what you think and how you would use Vintage Ratings in your own portfolios.
 
FURTHER READING
Topic: Portfolio building


Comments

Would you like to leave a comment?

Register with FundExpert or Log-in

Artemis 2019

FundExpert on Twitter Twitter

Archive