Investors have moved out of some stocks on a number of concerns, not least the plunge in the price of oil. While this could ultimately be good news for a number of markets and economies, the reaction is still one of uncertainty and energy stocks have sold off heavily as a result.
While oil is casting a shadow over the end of 2014, F&C’s Gary Potter says where it goes in 2015 will be an issue that no investor can ignore. While there will be some losers, such as the countries which rely on their oil exports, lower prices will be “massive stimulus” for the world economic and this benefit could well dwarf the problems created.
But we looked at lots more beside oil this week and there’s a selection of our favourite stories below. From everyone at FE Trustnet, have a great weekend.
Gleeson: Why I’ve just bought Neil Woodford for the first time
FE Research head Rob Gleeson told us this week that he’s bought Neil Woodford for the first time, adding the manager’s £3.7bn CF Woodford Equity Income fund to his pension in anticipation of a difficult 2015.
Gleeson wants to invest in a manager with a proven ability to protect on the downside, as he expects risk assets to face a very tough period when the Bank of England next year lifts interest rates from their historic low of 0.5 per cent.
He told FE Trustnet: “I’ve taken the decision to soften my UK equity exposure and Woodford is the perfect fit for that.”
“My UK equity exposure is very aggressive – I hold Nigel Thomas’ AXA Framlington UK Select Opps fund and Giles Hargreave’s Marlborough UK Micro Cap Growth fund. I’m happy with these funds, but am mindful that my beta is quite high.”
Performance of manager and manager peer group composite over 10yrs
Source: FE Analytics
The 2014 sweet spot: Mark Barnett leads the UK funds with top decile returns and volatility
As we approach the end of 2014 investors are looking back over the past year to see who has come out on top, so we’ll ran the numbers on which managers have made first decile returns while being among the least volatile funds of their sector.
When looking at the IMA UK All Companies sector we found just six funds are first decile for both returns and volatility – with three of these being headed by FE Alpha Manager Mark Barnett.
Barnett’s £12.3bn Invesco Perpetual High Income, £919.4m Invesco Perpetual UK Strategic Income and £6.5bn Invesco Perpetual Income fund topped the research by making the sector’s third, fourth and fifth highest returns over the year to date. They did this while offering investors a much smoother ride than the average fund.
Performance of funds vs sector and index over year to date
Source: FE Analytics
George Godber and Georgina Hamilton’s £129.1m CF Miton UK Value Opportunities fund, the £9.3m MFM Bowland fund, managed by Hargreave Hale's Leon Shuall, and Aruna Karunathilake's £116m Fidelity FAST UK fund were the others combining high returns with low volatility.
Troy's Brooke: Don’t obsess over the most active managers – they could cost you
Although FE Trustnet spends a lot of time searching for genuinely active managers, Troy’s Francis Brooke says investors shouldn’t rely too much on ‘active share’ as this could lead them down a dangerous path.
Active share measures how different a portfolio is from the composition of its benchmark and has been the focus of much attention recently. Fans of the metric have called for it to be more widely used, as it can help to differentiate between genuine active managers and ‘closet trackers’.
However, FE Alpha Manager Brooke told us: “There’s this idea that you need a high active share to be a good fund manager, but this is only one of a number of factors that should be considered: the beta and alpha of a fund, its absolute volatility, the types of companies it holds, and so on.”
“If you’re saying that you should only invest in active managers with a high active share – and it’s increasingly feeling that way – I think you are encouraging investors to take on a lot more risk. You’ve got to temper this with other factors, otherwise it’s a real danger.”
Buy, hold or fold: Adviser verdict on Unicorn UK Income
The five FE Crown-rated Unicorn UK Income fund has been the best performing portfolio in the IMA UK Equity Income sector since its launch in May 2004 and has beaten the FTSE All Share by more than 100 percentage points in the process.
Performance of fund vs sector and index over year to date
Source: FE Analytics
However, its performance has recently dipped following the sell-off in small caps, which are its preferred hunting ground, earlier in the year. What’s more, manager John McClure sadly passed away during the summer.
Fraser Mackersie and Simon Moon now run the fund. They were named co-managers with McClure in January this year but had worked alongside him for around six years.
In this article, we asked leading fund pickers whether they now view the fund as a buy, a hold or a sell.
