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The funds topping their sectors in three very different years

14 January 2019

We find out how many funds have been able to outperform their peers in the different market conditions of the past three years.

By Gary Jackson,

Editor, FE Trustnet

The past three years have thrown up challenging conditions for investors to navigate for very different reasons but more than 20 funds have been able to top their respective sector in each of them, research by FE Trustnet shows.

The difficulties of 2018 are fresh in investors minds as a combination of the Federal Reserve’s tighter monetary policy, trade tensions between the US and China, Brexit uncertainty and weaker economic growth led to losses in many parts of the globe.

This came after a 2017 that was characterised by very low volatility and healthy returns from most asset classes as investors anticipated synchronised global growth and a continuation of the bull run.

Performance of indices by calendar year

 

Source: FE Analytics

Prior to this, 2016 ended up being a strong one for many assets although many active managers were wrong-footed by the Brexit result in the UK and the election of political outsider Donald Trump as US president.

Despite these diverse conditions, a handful of funds in the Investment Association universe – 23, to be precise, out of close to 4,000 – have been in the top quartile of the peer group in all three of these years.

All 23 of these funds are revealed in the table below, ranked in order of their cumulative total return over the three-year period under consideration.


Coming out on top is Polar Capital Global Technology, which made 94.51 per cent over the three years to the end of 2018. The fund resides in the IA Technology & Telecommunications sector and is managed by Ben Rogoff and Nick Evans.

Rogoff and Evans’ £1.9bn portfolio is based around eight core secular themes which they believe have multi-year tailwinds, such as e-commerce, cybersecurity and robotics. It also follows several emerging themes that are smaller and less established.

Square Mile Investment Consulting & Research gives Polar Capital Global Technology an ‘A’ rating. Its analysts said: “We believe this is an attractive fund for long-term investors who are looking for exposure to rapidly growing technology companies.

 

Source: FE Analytics

“Technology is constantly evolving and continued vigilance is required by the managers to keep informed of developments. The fund is managed by experienced investors who are skilled in identifying changing industry trends and the companies that are poised to benefit as a result.”

Lindsell Train Japanese Equity comes next. This £274.1m fund is managed by Michael Lindsell, who has specialised in Japanese equities since 1985 and has built up a very strong long-term track record.

Like all Lindsell Train funds, this is built around a highly concentrated portfolio of high-quality, cash-generative business franchises. The portfolio, which very rarely changes, includes names such as chemical and cosmetics company Kao, games giant Nintendo and information technology firm OBIC Business Consultant.


The third-placed fund on the list is Jupiter UK Smaller Companies. Like many others on the list, it made a loss in 2018 but given the challenging conditions of the year still found itself in the top quartile.

Managed by James Zimmerman since June 2015, the £389.8m fund has a bottom-up approach and avoids making macroeconomic bets. Zimmerman therefore attempts to avoid leaving the portfolio overly exposed to any macro risks and to that end has ensured a balance between stocks that are focused on the UK economy and those with a more global approach.

In a recent update, the manager added: “I continue to prefer, almost exclusively, owner-managed businesses. My belief is that the long-term outcomes for companies in which management and the board have serious ownership are superior to those run by individuals who are more likely to come and go.”

Performance of fund vs sector and index over 3yrs

 

Source: FE Analytics

There are quite a few large funds on the above list. Liontrust Special Situations is the biggest with assets under management of £3.9bn; the fund is run by the FE Alpha Manager duo of Anthony Cross and Julian Fosh.

The fund uses Liontrust’s proprietary Economic Advantage process, which is one of the reasons it has an ‘AA’ rating from Square Mile. “This is a very well-considered and defined investment process which steers the managers towards relatively steady businesses that are gradually growing and generating high levels of cash. Essentially, the team is looking for companies operating with a clear and unique competitive edge,” the firm added.

Other larges funds include Baillie Gifford Managed (assets under management of £3.5bn), Vanguard UK Government Bond Index (£2.8bn), Royal London Sterling Extra Yield Bond (£1.6bn) and Marlborough UK Micro Cap Growth (£1.1bn).

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.