A sub-fund of BNY Mellon Managed Funds I
Structured as a fund of funds, the Newton Managed Targeted Return Fund has multiple performance targets. It achieved two out of the three of these over the period under review. As such, while its overall rating is green, it has received an amber rating for performance.
The fund, which also received an amber rating for performance in 2020, failed to reach its target of UK Retail Price Index (RPI) +4% per annum over five years, before fees.
However, based on an improvement in performance, client satisfaction with the returns generated, along with positive results in some 85% of the other criteria examined, the fund was given an overall green score.
External analysis shows that overall fees on the fund, and its OCF, are generally equivalent or lower on the Newton Managed Targeted Return Fund than other competing products.
The two largest investors in the fund are both invested in the X share class, where the annual management charge is paid outside the fund. The OCF for the X share class is 0.01% higher than peers. However, on the fund’s platform share class, W, costs are 0.15% lower than peers.
In addition, in examining transaction costs and their impact on the fund, the board notes this is not excessive due to its low trading volume and turnover (the number of buys and sells it makes in a year).
The fund has several performance objectives and has met two of the three. Over the year ending 31 March 2021, the fund achieved its primary aim of a positive return in sterling terms. It has also consistently achieved its target of achieving positive returns over rolling three years.
However, we note the fund has not achieved RPI +4% per annum over five years, before fees. That said, we do acknowledge it has improved over the past year in reaching this goal.
Over the five years ending 31 March 2020, the fund’s performance was less than RPI +2% per annum. This year, as at 31 March 2021, it was achieving RPI +3% per annum.
Following last year's Assessment of Value report and in light of our concerns on the long-term performance of the fund, we engaged with the manager to evaluate the long-term objective. As part of this performance and objectives review, we spoke with the largest client, by assets, in the fund. They confirmed they are pleased with the manner in which the fund is managed and the results obtained.
While the fund, structured as a fund of funds, achieved a positive return in sterling terms over a rolling three-year period, ending 31 March 2021, we remain alert to its longer-term underperformance.
Although this is the second year we have singled out this fund for performance reasons, we are appeased with the notable uptick in returns and that the largest client within the fund is very satisfied with its performance.
We will continue to monitor the fund’s five-year performance against its target benchmark (UK RPI +4% per annum) and will maintain our dialogue with its manager to ensure the objective remains appropriate.
