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FE Trustnet’s 2014 fund picks: Where are they now?

30 June 2014

Halfway through the year, the journalists and editors at FE Trustnet review their fund picks for 2014.

By Jenna Voigt,

Editor, FE Investazine

Despite a rocky start to the year, equity markets have continued to break through to new high.

Volatility has also dropped to at or near all-time lows, which for many is a sign the rising markets are about to turn against investors.

Whatever you think the near-term outlook is, there are a number of funds that have benefitting more than others since the start of the year.

Here, we reveal how our own fund picks have done since January.

My own choice, the five FE Crown rated Newton Asian Income fund is leading the pack on the far turn, up 5.79 per cent year to date.

In spite of their dire performance last year, Asian and Emerging Markets appear to be coming back into favour.

FE Trustnet editor Joshua Ausden’s pick – Somerset Emerging Markets Dividend Growth – has also performed well since the start of the year, making 4.65 per cent for investors.

Production editor Anthony Luzio and news editor Thomas McMahon have fared less well, however. Both the SLI Global Smaller Companies fund and the Fidelity Special Situations portfolio were hit by a selloff in small caps and are in negative territory year-to-date.

Year-to-date performance of funds

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Source: FE Analytics


Newton Asian Income

At the start of 2013 I was more cautious than the rest of the team at FE Trustnet and chose to take a more careful approach to equity investing through the Henderson UK Equity Income fund.

Given the strong performance of equities last year, if anything, this year I was more nervous. But there are very few attractive asset classes out there apart from equities and I thought it was time to reinvest in an underperforming area where there was more value to be had.

So far, my decision to back Jason Pidcock’s Newton Asian Income fund has paid off. The fund has come back into the top-quartile after a rough patch toward the end of last year.

The fund is one I’ll hold onto because I think the fund manager can continue to outperform as the outlook improves in Asia and the added 4.55 per cent yield is a bonus to capital growth.

Investors are showing more willingness to buy into emerging markets and capital inflows are already starting to increase in the region. Asia will likely be one of the biggest beneficiaries of this shift.



Somerset Emerging Markets Dividend Growth

Though Ausden didn’t want to sell his 2013 fund pick, Giles Hargreave’s Marlborough UK Micro Cap Growth fund, the fund he though would do better in 2014 is the five FE Crown rated Somerset Emerging Markets Dividend Growth fund, headed up by FE Alpha Manager Edward Lam.

The fund is up 4.65 per cent since the start of the year and has a 2.4 per cent dividend yield. The fund has been one of the best-performing in the IMA Global Emerging Markets sector over the last three years. It’s up 14.97 per cent while both the sector and index are in negative territory.

Performance of fund vs sector and index over 3yrs

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Source: FE Analytics

Ausden says he’ll definitely hang on to the fund because he thinks sentiment toward emerging markets has only just started to shift.

Flows are starting to turn in favour of the undervalued region and away from more overvalued stocks in developed markets.


Royal London UK Equity Income

Senior reporter Alex Paget went for the Royal London UK Equity Income fund at the start of the year and it’s a good thing too.

Like McMahon, he though the small and mid-cap rally had run its course so he decided to shift away from the bullish CF Eden UK Select Opportunities fund and pick up the steady, income-paying Royal London UK Equity Income fund, run by Martin Cholwill.

The fund is up 2.06 per cent since the start of the year, but more importantly, the manager has proven his ability to deliver strong returns in both rising and falling markets.

As shown by a previous FE Trustnet study, the five FE Crown rated fund is the only UK equity income portfolio to have beaten its sector in each of the last five calendar years.

Over the last five years, the fund is up 145.07 per cent while the IMA UK Equity Income sector and FTSE All Share index are up 99.34 per cent and 97.34 per cent, respectively.


Performance of fund vs sector and index

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Source: FE Analytics

Cholwill’s proven stockpicking ability is good news as small and mid-cap stocks were battered in a selloff in the market cap in late February.


Fidelity Special Situations

Although McMahon thought the small and mid-cap rally had run its course at the start of the year, he decided to back the Fidelity Special Situations fund, run by FE Alpha Manager Alex Wright.

The manager is known for his outperformance on the five FE Crown rated Fidelity UK Smaller Companies fund and McMahon thought that the manager would continue to perform well with the added flexibility to invest in large caps.

Unfortunately, the fund was hit by the dip in small caps and is down 2.4 per cent since the start of the year when Wright officially took over the fund.

McMahon says he’ll continue to hold the fund because it’s only been six months under a new manager and his reasons for holding it were because he wanted something with decent large cap exposure, though he admits the manager hasn’t made the best of it so far.

However, McMahon thinks a fund with the flexibility to invest in large caps is going to do the best in a sideways market.


SLI Global Smaller Companies

Production editor Anthony Luzio has had the toughest start to the year, as his choice – FE Alpha Manager Harry Nimmo’s SLI Global Smaller Companies fund – is down nearly 10 per cent since the year began.

The fund was hit by the global selloff in small and mid-cap stocks, shedding nearly 14 per cent from mid-March to mid-May. It has come back slightly since but not enough to regain its lost ground.

However, since launch in January 2012, the fund is still well ahead of its peers in the IMA Global sector, with returns of 35.08 per cent.

Performance of fund vs sector since launch

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Source: FE Analytics

Luzio says there’s no reason to sell out of the fund in spite of its tough performance because he thinks there will be high growth from emerging markets and this fund is well placed to reap the rewards.

He also decided to hold onto last year’s pickAberdeen Emerging Markets.

Luzio says he holds both funds on a long-term view and takes comfort from drip-feeding when the share price is depressed because that means the potential gains are much greater.

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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.