A sub-fund of BNY Mellon Managed Funds II
Despite its mixed performance over the past year, the fund achieved a positive return over the 12 months under review and steps have been taken to address what were previously considered comparatively high fees. On this basis, we believe the Absolute Insight Fund has provided investors with improved value since last year.
Our overall assessment has, therefore, been upgraded from last year’s amber rating to a green rating in 2021. However, the fund retains an amber score for performance with respect to its failure to meet the five-year performance target. We intend to engage with the fund's manager and take action with respect to this secondary five-year performance objective.
Following last year’s overall amber assessment, we took steps to address the fee structures on the Absolute Insight Fund.
Relatively higher management fees for retail investors were viewed as having a detrimental impact on performance.
Consequently, some share class fees were lowered and an expense cap was recently put in place. Specifically, we reduced the annual management charge (AMC) on the retail A, Ap and Fp share classes to improve the net-of-fees performance outcome. In assessing comparable market rates, we believe our platform share class, W, remains a competitively-priced share class accessible for many advised retail investors.
1.50%
0.85%
1.00%
Source: Insight/BNY Mellon Investment Management 2021.
The Absolute Insight Fund has regularly realised returns in line with (or exceeding) its three-month GBP LIBOR based investment objective on a rolling 12-month basis, after fees.
Over the past year, ending 31 March 2021, the fund’s rolling one-year returns were negative for most of the period. This was due in large part because of the sharp fall in markets at the start of the review period, March 2020, as Covid-19 related-lockdowns and fears hit international markets.
The year has seen a period of steady recovery to finish the 12-months in positive territory, thereby achieving its objective. However, as was the case in our 2020 assessment, the Absolute Insight Fund did not achieve its secondary five-year performance target before fees (see fund objective) over the time frame ending 31 March 2021. This remains a concern for the board and actions will be taken to address the five-year return target.
As at 31 March 2021, the Absolute Insight Fund was invested in five underlying absolute return funds. Each was managed by Insight Investment and invested in a different area of the market.
This changed on 9 April 2021, just after the review period we examined. It also corresponded with a withdrawal of investment from the fund, resulting in a smaller size in terms of assets under management.
With the aim of strengthening overall performance, in April the fund removed Insight’s emerging market debt, credit (bond) and dynamic opportunities funds from the Absolute Insight Fund. They were replaced by two new Insight-managed funds: BNY Mellon Absolute Return Global Convertible Fund and BNY Mellon Absolute Return Bond Fund.
Today 30% of Absolute Insight Fund is held in each of these two portfolios as well as in the BNY Mellon Absolute Return Equity Fund. These three open-ended funds are part of the BNY Mellon Global Funds plc UCITS fund range domiciled in Ireland. The final 10% is invested in the Absolute Insight Currency Fund.
As this change happened just outside the review period, it is too soon to tell its effects although we are encouraged by the action taken to improve performance. Ahead of the change, Insight did back-test the performance of the fund as if it had been constructed using the existing four portfolios. It found an improvement in the expected risk/reward compared to the previous structure.
Fees charged are believed by the board to represent good value for money across all share classes following their reduction from last year, along with the recent addition of a cap on expenses. This assessment is based on peer comparison as well as the overall net-of-fees return provided over the past 12 months.
We believe the philosophy and tools employed in the Absolute Insight Fund remain robust and continue to offer investors value, notwithstanding disappointing performance results in recent years. The fund’s approach results in returns with relatively low volatility.
With lower fees for retail investors introduced on 1 January and in light of a recently reduced asset base (smaller fund size), the focus now turns to monitoring the changes aimed at improving performance. In addition, the board does intend to challenge the fund’s five-year objective given the consistent inability to meet it in recent years.
Class A shares
Not available for further investment.
Class Ap & Class Fp
Are Sterling-denominated shares available to any retail investor.
Class S & Sp
Are shares which are available exclusively to investors who are clients of or who otherwise have an investment management agreement with Insight or its associates. There are no specific minimum initial investment levels. However, such investors may be subject to minimum account maintenance or other qualifications established from time-to-time by Insight or its associates.
Class W
Are Sterling denominated Shares which are available to: a) to institutional investors who meet the minimum initial investment level and the minimum holdings as set out in Appendix 3; and b) entities designated by the Authorised Corporate Director (ACD) as providing platform services, and which have platform arrangements (or an equivalent) with the ACD or its associates, and which are investing on behalf of underlying investors rather than on their own behalf. There are no specific minimum initial investment or holding requirements, however platforms will be subject to minimum account maintenance or other qualifications established from time to time by the ACD.
