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The funds that made you the most money in 2014

29 December 2014

The top-10 best performing funds of 2014 all focus on Indian equities, which benefited from a boost in sentiment following the election of Narendra Modi as prime minister.

By Gary Jackson,

News Editor, FE Trustnet

Funds focusing on Indian equities dominate the list of top performing portfolios this year after the country voted in a reformist prime minister, while managers investing in Russia, energy and commodities have been hit hardest as these parts of the market sold off.

Much of 2014 proved difficult for fund managers as most equity markets failed to make significant progress, while bonds surprised almost everyone with their outperformance.

Investor sentiment took a dip this year on the back of geo-political tensions in the Middle East and eastern Europe, the spread of the Ebola virus, the plunge in the oil price and growing attention on the timing of central banks’ first interest rate hikes.

FE Analytics data on the performance of all funds recognised by the Investment Management Association shows the 10 that delivered the highest returns between 1 January 2014 and 29 December all focus on Indian equities.

 

Source: FE Analytics

Sentiment towards India surged this year after Narendra Modi was elected prime minister in May, with the BSE 100 up 35.15 per cent year-to-date compared with an 11.92 per cent gain in the MSCI AC World index.

Modi pledged to speed up government decision-making processes and remove bureaucratic hurdles that have held back development. 

Thomas McMahon, an analyst with the FE Research team, said: “The main reason for the Indian market’s outperformance this year was the election of a prime minister, Narendra Modi, seen as pro-business and reformist.”

“Modi oversaw strong economic performance as chief minister of Gujarat and is the first prime minister to hold a majority in the lower house since 1984, giving him a strong position from which to make his reforms.”

As the table above shows, the fund making the best returns in 2014 is the three FE Crown-rated Matthews Asia India portfolio, managed by Sharat Shroff and Sunil Asnani. It is off the radar of most investors with assets of just £3.8m.

The fund launched in June 2011 and since then has made 28.5 per cent in sterling terms, outperforming the 5.34 per cent rise in its BSE 100 benchmark. It has achieved this with volatility of 18.35 per cent, which is four percentage points lower than the benchmark's score.


Following the strong gains over 2014, McMahon says investors should not expect to see a repeat performance in the coming 12 months.

“Indian companies have been seeing good growth in their profits this year and reforms are likely to support sentiment in the short term,” he said.

“Investors should be aware that the stock market is now more expensive than many other options, however, so they are unlikely to see the same level of outperformance in 2015.”

The best performer this year that does not invest in Indian equities is Linden Thomson’s five FE Crown-rated £481.2m AXA Framlington Biotech fund, which returned 40.9 per cent. This fund has made the 11th highest gain over 2014 to date. 

This isn’t the first time it has made strong returns – in 2013 it was up 63.65 per cent and in 2012 it rose 24.3 per cent, while it made a 7.6 per cent return in the down market of 2011. This record of high returns means that its factsheet is one of the most viewed on FE Trustnet.

However, some commentators have argued that biotech stocks' strong run over recent years has made them expensive. Chris Wise, managing director of Gemmell Financial Services, told FE Trustnet recently: “As this sector has been doing so well, it will be a lot more difficult to get the returns from the fund that you have just had.”

Other healthcare funds have also had a decent 2014. Polar Capital Healthcare Opportunities is up 33.93 per cent this year and is the 17th best performer, AXA Framlington Health is in 23rd place with a 28.68 per cent gain and Fidelity Global Health Care is 25th after returning 28.47 per cent.

Meanwhile, a number of bond funds – including Pimco GIS Euro Ultra Long Duration, Standard Life Investments Corporate Debt and Pimco GIS Euro Long Average Duration – are among the 25 top returning portfolios over 2014.

Looking at the other end of the spectrum, funds that have been affected by the plunging oil price, the end of the commodity supercycle and turmoil in the Russian economy have made the year’s largest losses in the IMA universe.

The vast majority of funds in the list of 25 worst performers focus on energy, natural resources or eastern European equities, reflecting the strong headwinds that have hit these sectors over the past year.



Source: FE Analytics


Russia has fallen spectacularly, after the US hit it with sanctions over its intervention in Ukraine and then the fall in the oil price piled misery on misery. The OPEC group of oil producing countries has so far ruled out limiting supply to boost the oil price.

McMahon added: “Russian equities have been hard hit by the collapse in the value of the rouble – it has halved versus the dollar this year. But the market has also been hit by the fall in the price of oil, with large oil companies making up 60 per cent of the Russian market.”

“Normally being such a large oil exporter would help Russia if its currency fell in value, as oil is priced in dollars, so these could be exchanged for more roubles to fund the government. However, the plummeting oil price has diminished this effect.” 

“It is a perfect storm for Russia, and the politics of NATO and OPEC means it is hard to see any change soon.” 


In the new year, FE Trustnet will take a closer look at the winners and losers of 2014 according to various metrics. 

 
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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.