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How last year’s top equity funds are getting on in 2018

12 July 2018

FE Trustnet looks at the best performer across a range of sectors in 2017 and considers their returns so far this year.

By Jonathan Jones,

Senior reporter, FE Trustnet

Four of the top performing funds in the six main equities sectors have landed in the top three of their respective sectors again this year, according to data from FE Analytics.

Market conditions have varied somewhat over the past 18 months, with 2017 headlined by a lack of overall market volatility while this year has seen much choppier markets.

Indeed, it has been tough to recreate top performance in both years, with fewer than 15 per cent of top quartile funds a year ago achieving the feat so far this year.

However, while volatility has picked up, stock dispersion has been less than some had expected and a market rotation has also failed to materialise as yet.

As such, some funds that topped the performance charts relative to their peers in 2017 have continued to perform well this year.

Below, FE Trustnet revisits some of last year’s best performers from the six main equity sectors to see how they got on during the first half of 2018.

Starting with the US, where the momentum trade has been key for investors with the likes of the FAANG stocks (Facebook, Amazon.com, Apple, Netflix and Google) continuing to perform well.

The top performer in the IA North America sector last year was the $2.8bn Morgan Stanley US Growth headed by Dennis Lynch. The four FE Crown-rated fund returned 31.59 per cent last year and so far in 2018 it has been the second-best in the sector, up 24.12 per cent.

Performance of fund vs sector YTD

 

Source: FE Analytics

The portfolio has an overweight to the information technology sector, with Amazon.com, Alphabet, Twitter and Facebook among its top 10 holdings.

Morgan Stanley US Growth has been remarkably consistent over the past decade, sitting in the top three funds in the sector over one, three, five and 10 years as the momentum and growth trade has outperformed since the financial crisis of 2008. The fund has an ongoing charges figure (OCF) of 0.94 per cent.

In the IA Global sector, the top fund last year was the £45m Aubrey Global Conviction run by Andrew Dalrymple.

The fund is 44 per cent weighted to the US – a moderate underweight to the MSCI World index benchmark – and holds 29 per cent of its portfolio in Asia ex-Japan stocks.


Around 36 per cent of the portfolio is in the software & services sector, with US tech giants such as Netflix and Amazon.com as well as Chinese titans Tencent and Alibaba amongst its top 10 holdings.

The fund is another consistent performer, in the top quartile of the sector over one, three, five and 10 years as well as beating the MSCI World index in all of those periods.

Last year it topped the sector, returning 36.96 per cent and this year it is currently third, having returned 19.87 per cent. It has an OCF of 1.73 per cent.

Away from US-dominated benchmarks, the top performing fund in the Japanese equities space in 2017 is also the second-best so far this year.

The five FE Crown-rated Legg Mason IF Japan, overseen by Hideo Shiozumi, has made the remarkable achievement of being the top performing fund in the IA Japan sector over one-, three-, five- and 10-year timeframes.

Indeed, its long-term performance is impressive, returning 720.54 per cent over the past decade. The sector and Topix benchmark meanwhile have returned 135.56 and 134.44 per cent respectively.

Performance of fund vs sector and benchmark over 10yrs

 

Source: FE Analytics

Japan has been an interesting story in recent years, with prime minister Shinzo Abe’s eponymous economic programme – Abenomics – beginning to pull the economy and the stock market out of a 20-30 year lull.

The £1.1bn fund invests primarily in the mid- and small-cap space and is currently overweight industrials and healthcare.

However, it has been very volatile over the past decade, meaning that it may not suit all investors. The fund has an OCF of 1.02 per cent.

The final fund to achieve the top spot in its sector last year and remaining in the top-three over the course of 2018 so far is the £308m LF Miton European Opportunities fund.

Managed by Carlos Moreno and Thomas Brown since its launch 2015, it targets a combination of both income and growth.


The portfolio has the highest allocation to Nordic countries (Denmark, Sweden, Norway and Finland) with more traditional hunting grounds Germany, Italy, Switzerland and France also holding double-digit weightings.

Since inception the fund has been the top performer in the IA Europe ex UK sector, returning 78.24 per cent against the average peer’s 43.4 per cent.

Performance of fund vs sector since launch

 

Source: FE Analytics

Last year the portfolio returned 28.35 per cent, while this year it is the third-best performer, up another 8.43 per cent. The fund has a yield of 53 basis points and an OCF of 0.95 per cent.

Not all of the top performers from last year are having quite as good a year as the others, however. Slater Growth – the top performing fund in the UK last year, is in the IA UK All Companies sector’s second quartile this year.

Run by FE Alpha Manager Mark Slater, the four FE Crown-rated fund is another that has been a consistent performer over the past decade.

The fund has had the second-most positive monthly periods (and therefore second-least in negative territory) and has returned 204.35 per cent over 10 years – a top quartile performance.

Last year was not the first time the fund has topped the sector in the last decade – it also beat its peers in 2014. It has an OCF of 0.84 per cent.

Finally, in the IA Global Emerging Markets sector, Baillie Gifford Emerging Markets Growth has gone from top of the sector last year to a third quartile performer this year.

The five crown-rated fund has been overseen by Richard Sneller since 2005 with co-manager Mike Gush joining him in 2015.

Last year the fund returned 39.76 per cent versus the average peer’s 24.43 per cent and the MSCI Emerging Markets index’s 25.4 per cent.

It is another with strong long-term track record, with a top quartile performance over one, three, five and 10 years. The fund has an OCF of 0.79 per cent.

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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.