The FTSE 100 has recovered slightly today after a key US employment report came in better than expected, but many investors are warning that the remaining months of the year could be somewhat choppy as attention remains fixed on high valuations, geo-politicial risks and the threat of deflation in the eurozone.
Next week, FE Trustnet plans to take a look at the funds that could fit the bill if you just don’t whether markets will be going up or down. Until then, we leave you with a review of our best stories of the week.
From all of us here at FE Trustnet, have a great weekend.
Ashworth-Lord: The biggest mistakes all investors are guilty of making
While most investors will look back a fund’s past performance when researching, Keith Ashworth-Lord, manager of the five crown-rated Premier ConBrio Sanford Deland UK Buffettology fund, believes too much importance is given to this factor.
Ashworth-Lord notes that a number of factors mean its unit holders will have had very different experiences even if a fund delivered stellar returns over some time frames depending on when they bought in.
He gave the example of Peter Lynch’s Fidelity Magellan fund, which achieved an average return of 29 per cent a year between 1977 and 1990.
However, Lynch believed that more than half of his investors lost money, as they traded and out of this fund at the wrong times.
“How does the typical investor in a fund run by one of the most successful managers of all time end up falling behind the overall market? The reason is simple: poor timing,” Ashworth-Lord said.
It’s a subject we at FE Trustnet found fascinating so we’re going to revisit it with a new study next week.
Keep your eyes out for that one.
Julie Dean’s exit triggers £600m outflow from Schroder UK Opps fund
Speaking of investors moving in and out of funds, FE Trustnet editor Joshua Ausden revealed that the Schroder UK Opportunities fund has seen its assets fall by £675m since former manager Julie Dean stepped down.
FE data suggests investors have pulled more than £600m from the four FE Crown-rated fund since Dean’s resignation was announced at the start of September.
Its assets are now half what they were in February following outflows and recent underperformance.
Size of fund since Oct 2011
Source: FE Analytics
Matt Hudson, manager of the five-crown rated Schroder UK Alpha Income fund, has taken over from Dean as lead manager and he told FE Trustnet last week at the FE Select 100 UK Equity Income event that he has no reservations in taking over the growth focused fund.
Schroders declined to comment on the redemption.
We’ll be speaking to Hudson in the future about his plans for the fund.
The UK equity income funds that have given you the fewest sleepless nights
Investors love consistency and that happy feeling when a fund seems to keep going up and up, so FE Trustnet senior reporter Alex Paget went hunting for UK equity income funds that have been the most consistent month in, month out.
The research shows the five crown-rated Unicorn UK Income fund has made a positive return in 47 out of the last 60 months, making it the most consistent portfolio in the IMA UK Equity Income sector over the last five years.
Source: FE Analytics
However, Henderson UK Strategic Income, Jupiter Income Trust, M&G Dividend and Premier Optimum Income were found to be the least consistent members of the sector with positive returns in 33 of the last 60 months.
Highly rated absolute return funds smash the All Share
Given that markets were relatively flat for the first nine months of 2014, FE Trustnet took a look at the IMA Targeted Absolute Return sector to see if any highly rated members had managed to beat the FTSE All Share.
We found that David Crawford’s £86.7m City Financial Absolute Equity fund is the sector’s best performer year to date, followed by FE Alpha Manager John Bennett's £62.6m Henderson European Absolute Return fund and Old Mutual Global Equity Absolute Return, which has been managed by Ian Heslop, Mike Servent and Amadeo Alentorn.
The study also showed that the average absolute return fund has managed to beat those in the IMA All Companies sector.
Over the year to date, absolute return funds are up 1.78 per cent, compared with a 2.26 per cent loss from their UK equity rivals.
The trust that surges when the market is about to crash – and it’s surging
Those flat markets mentioned above didn’t last for long, after the FTSE 100 plunged more than 110 points on Thursday thanks to a combination of geo-political risks and a disappointing press conference by European Central Bank president Mario Draghi.
FE Trustnet had flagged up the risk of a looming market correction that very morning but highlighting the recent strong performance of the BH Macro trust, which sits in the IT Hedge Fund sector.
Cantor Fitzgerald investment company analyst Charles Tan has been buying the trust as it has a track record of making money when all other asset classes are falling.
Tan says that when BH Macro starts to rise, it’s often a good sign that a correction is on the horizon.
And as this graph shows, the trust has certainly started to move...
Performance of trust vs index in 2014
Source: FE Analytics
