City Financial Absolute Equity, Marlborough Multi Cap Income and CF Miton UK Value Opportunities are among some of last year’s loss-making funds that are boasting double-digit returns in 2017. 
Last year was a challenging environment for some fund managers to deliver returns as previously loved sectors underperformed given the wide swing in investment styles in the latter half of the year.
For some funds it proved difficult to produce a positive return at all. However, several managers have stormed back in 2017 and have even generated significant double-digit gains so far this year.
Below FE Trustnet considers some of last year’s loss-making funds that have risen by more than 10 per cent during the first seven months of 2017.
City Financial Absolute Equity
First on our list is the £221.2m City Financial Absolute Equity fund, overseen by FE Alpha Manager David Crawford and assistant fund manager Ade Roberts.
The absolute return fund employs a long/short strategy that aims to achieve a positive return over rolling 36-month periods through investment in UK and global equities.
The fund was down by 10.67 per cent during 2016 but has rebounded strongly in 2017 so far, registering a 14.55 per cent return for the first seven months of the year.
Performance of fund vs benchmark YTD
Source: FE Analytics
Over a trailing three-year period between 1 July 2014 and 30 June 2017 the fund has generated an annualised return of 11.4 per cent.
In its most recent fund factsheet, the managers noted: “We have not seen a sustained period of risk aversion for 18 months and the economic cycle is now more than eight years old.
“This should give investors reason to be cautious, however, we currently see the animal spirits riding high.
“New issuance into the market continues at a pace without much thought given to the bear case in many of these stocks.”
The fund has an ongoing charges figure (OCF) of 0.94 per cent. It also carries a performance fee of 20 per cent of the outperformance of three-month GBP Libor with a high watermark.
AXA Framlington Biotech
Next in our study is the £508m AXA Framlington Biotech fund, managed by Linden Thomson.
The specialist equity fund, which focuses on the biotechnology sector, fell by 4.95 per cent last year. So far this year the fund is up by 12 per cent.
However, the fund aims to produce long-term capital growth and has delivered a 189.75 per cent return over five years.
“Against a dynamic political backdrop, the key long-term growth drivers remain intact,” said Thomson. “These are ageing populations, increasing frequency of lifestyle diseases (obesity, diabetes) and growing demand in emerging markets.
“We believe companies developing innovative therapeutics to tackle the challenges brought by these long-term growth drivers will justify premium pricing of their products versus those who are undifferentiated.”
She added: “The biotech sector remains an innovation leader and this convinces us that we are on the cusp of another wave of healthcare innovation.”
The fund has a 0.82 per cent OCF.
Elite Webb Capital Smaller Companies Income & Growth
Another fund that struggled last year was Elite Webb Capital Smaller Companies Income & Growth, which fell by 6.25 per cent in 2016.
The £2.8m UK equity fund has responded strongly, however, with a 25.14 per cent return in the year to 31 July: the strongest return for a 2016 loss-making fund.
Performance of fund vs sector & benchmark YTD
Source: FE Analytics
Manager Peter Webb has managed the fund since 2012 and aims to achieve a rising income with capital growth from a portfolio of UK smaller companies.
He wrote in the most recent factsheet: “The fund paused for breath in June following what can only be described as a very profitable start to the year.
“In part, this improved performance has come about because of a re-alignment of the portfolio earlier in the year to focus on international businesses benefitting from sterling weakness.
“However, our domestically-focused companies have also performed well.”
The fund has an OCF of 2.06 per cent.
Marlborough Multi Cap Income
Another fund which struggled in 2016 was Marlborough Multi Cap Income, headed up by FE Alpha Manager Siddarth Chand Lall.
The £1.5bn fund fell by 3.21 per cent during 2016, but has risen by 10.51 per cent during the first seven months of the year.
Performance of fund vs sector & benchmark YTD
Source: FE Analytics
Indeed, positive performance this year has helped the fund become a top quartile fund over one year generating a 16.1 per cent gain in the 12 months to 31 July, compared with a 13.32 per cent gain for the average IA UK Equity Income sector fund.
The fund invests predominantly in UK equities across the market capitalisation spectrum with the aim delivering an attractive and growing level of income in addition to long-term capital growth.
The fund has an 0.8 per cent OCF.
CF Miton UK Value Opportunities
Finally, the £329.3m CF Miton UK Value Opportunities fund has returned to positive territory in 2017 so far, with a healthy gain of 19.5 per cent following a 1.55 per cent loss in 2016.
FE Alpha Manager Andrew Jackson took over the four FE Crown-rated, value-oriented fund in July last year from George Godber and Georgina Hamilton, after moving from EdenTree Investment Management.
Under Jackson, the fund aims to identify companies whose estimated intrinsic value has yet to be reflected in its market valuation.
“2017’s special factor is the lapping of Brexit and its immediate aftermath, especially the devaluation in sterling which will now begin to unwind,” he noted recently.
“Throw in to the mix a debate about whether or not interest rates might begin to rise, cracks beginning to appear in the resilience of consumer spending and a government in headless chicken mode, and thus the scope for volatile but trendless markets is there for all to see.
“However, there is a lot going on at the stock specific level and the onus remains on ensuring the fund majors on maximising its risk adjusted investment potential; and that is the daily challenge which must be met to deliver long-term performance.”
The fund has an OCF of 0.83 per cent.