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Fund picks, giant losers and European deflation: FE Trustnet’s best stories of the week

09 January 2015

The FE Trustnet team rounds up its favourite articles of the week, including our own fund picks for the year ahead and a review of some of the worst performing portfolios in 2014.

By Alex Paget,

Senior Reporter, FE Trustnet

The major talking point of the week was no doubt the fact that the eurozone most probably entered deflation at the end of 2014.

After months of speculation, a flash estimate by European Union statistical office Eurostat showed that annual inflation for the 18-nation strong eurozone is expected to be -0.2 per cent in December.

However, as has been the case over recent years, bad economic news has meant good news for markets as the figures caused European equities to rally as investors started to bet on even more stimulus from the European Central Bank. Both the MSCI Europe ex UK index and the FTSE All Share are up more than 2 per cent over the last couple of days.

As well as covering the fallout of deflation in Europe, the team at FE Trustnet has focused on reviews of 2014 and outlooks for 2015, which have provided us with plenty to talk about. Here are five of our favourites.

Have a great weekend.
 

FE Trustnet's fund picks for 2015

We kick off with our own fund picks for the year ahead. Clearly, trying to predict the direction of any financial asset over a 12-month period is a fool’s game, so none of these choices should be taken as advice. 

Nevertheless, it seems some are willing to take a bit of risk with their funds this year.

Head of Trustnet content Josh Ausden went for the battered Neptune Russia & Greater Russia fund, news editor Gary Jackson went for the out of favour Neptune European Opportunities fund while reporter Daniel Lanyon chose the equally unpopular Baillie Gifford Japanese fund.

One choice which seemed to go down well with our readers and Twitter followers is the Schroder ISF Global Recovery fund, which was picked by investment and corporate content editor Jenna Voigt.

We will keep you updated with how they get on throughout the year and see who is out in front, but I think everyone agrees Tom Dobell is going to turn round his M&G Recovery fund (which happens to be my pick) in 2015…
 

Europe falls into deflation: Which funds should you hold?

Turning back to the main topic of the week, news editor Gary Jackson asked the experts which funds investors should look to hold now that Europe has fallen into deflation.

While two of the recommendations were relatively defensive, Ryan Hughes, fund manager at Apollo Multi Asset Management, said European QE has now become “absolutely inevitable” after the inflation numbers, and therefore thinks investors should look to take risk via Argonaut European Alpha, which is headed by FE Alpha Manager Barry Norris.

The fund has considerably both its benchmark and the IA Europe ex UK sector since its launch in May 2005.

Performance of fund vs sector and index since May 2005
    

Source: FE Analytics 


“You’ve seen how the market has reacted because everyone now thinks QE is coming. For most of last year the US was all about ‘bad news is good news’ and Europe has now reached that point,” he said.

“I would be thinking about having higher beta, slightly riskier European exposure rather than taking risk off. We’ve had Argonaut European Alpha for over a year on the basis we thought momentum was improving and we think that will do the job quite nicely.”


The giant funds that lost you money in 2014

Next on the list is another one from Jackson. In this article, using data from FE Analytics, he showed that over 60 funds running more than £1bn of investor money failed to make a positive return in 2014.

He focused on some of the most popular with retail advisers.

At the top of the list is the Evy Hambro’s BlackRock Global Funds World Mining fund, which has an AUM of £3.95bn and lost close to 20 per cent last year.

Commodities have fallen heavily over recent years, which has hit the companies the portfolio focuses on. It is overweight copper and iron ore miners but the price of the metals slumped in 2014 thanks to global surpluses in both.

Other funds on the list include Standard Life UK Smaller Companies, M&G Recovery and PIMCO GIS Emerging Local Bond.


Surely these funds can’t keep losing you money, can they?

Talking of funds which have lost you money, did you know the average gold mining fund in the IA universe is down a staggering 75 per cent since January 2011?

In fact, according to FE Analytics, with the exception of Evy Hambro’s BlackRock Gold & General fund in 2014, all of the seven gold funds in the IA universe have delivered negative returns in each of the last four calendar years.

Performance of composite portfolio versus indices since Jan 2011 



Source: FE Analytics 

Given those huge falls, we asked the experts whether now is actually the time to buy into the battered sector. Hawksmoor’s Richard Scott was positive, Premier’s Simon Evan-Cook was less so.


“The good times are over” – Gross and Flanders warn of worse returns in 2015

We end this round-up on a slightly negative note.

In this article, reporter Daniel Lanyon wrote how Janus Capital’s Bill Gross and JP Morgan’s Stephanie Flanders warn investors should expect broadly inferior returns – from both bonds and equities – this year compared even with last year.

“When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over,” Gross said. “With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable.”

Flanders, meanwhile, was more subdued in her language but in clear agreement that investors should expect less from 2015 than 2014.

“Last year’s moderate return will become even more moderate this year,” Flanders said.

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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.