Equity markets rallied while the euro took a dive against the dollar after ECB president Mario Draghi announced that the central bank would pump at least €1.1trn into the beleaguered eurozone economy from March 2015.
It’s not clear whether this plan will work, however, and the immediate reaction from most investors was one of cautious optimism. Expect European equities and bonds to be much more in the spotlight over the coming months.
While not quite as big as the ECB’s news, the third issue of Trustnet Magazine was published this week with a focus on pensions. Grab yourself a coffee and have a read here.
We’ve picked out a few of our favourite stories of the week for you to take a look at below. From everyone at FE Trustnet, have a really good weekend.
“I was never worried but…” Lyon’s Trojan fund rewards patient investors
Sebastian Lyon’s Trojan fund had a tough couple of years in 2012 and 2013 after investors chased the bull run and ignored the more defensive assets the portfolio is built around.
However, in an exclusive interview with FE Trustnet this week, the manager said: “At the end of 2013 I wouldn’t say we were worried, but it wasn’t a lot of fun.”
“It shouldn’t have been a big surprise that we didn’t perform so well as we’re never going to perform strongly in rallying markets. We never came close to changing what we were doing though, and I’m of course very glad that we stuck to our knitting and carried on.”
However, investors who stuck with the fund have been well rewarded since - our data shows it was top decile in the IA Flexible Investment sector in 2014 and so far in 2015.
Performance of fund, sector and index since Jan 2014
Source: FE Analytics
Draghi pulls out the bazooka: Fund managers react to eurozone QE
So the big news of this week was the ECB’s move to implement full-blown QE in the eurozone, with plans to start buying €60bn in assets a month from March. Markets reacted positively to the news but not all fund managers did.
Russell Investments investment strategist Wouter Sturkenboom said, when it comes to the attractiveness of eurozone financial assets, the ECB’s plans is the equivalent of “a really thick layer of icing on an already attractive cake”.
Martin Harvey, fixed income portfolio manager at Threadneedle, said the move “should be welcomed with optimism” as only a few months ago it would have been unthinkable for the ECB to have launched a government bond-buying package on this scale.
However, Old Mutual Global Investors' head of multi-asset John Ventre was more cautious: “Investors need to beware. QE programmes often don’t produce the effects you would assume. Through many rounds of QE in the US, the dollar ended up more or less where it started and bond yields rose while the Fed was buying them and fell while the Fed wasn’t.”
The FE Alpha Managers whose funds have come of age
In this article, we looked for individuals with FE Alpha Manager status who have recently celebrated three years at the helm of one of their funds. This is often the minimum track record investors wish to see, so these funds might just be appearing on their radars.
One of the notable funds to appear on the list is Majedie UK Income, which FE Alpha Manager Chris Reid has run since its launch in December 2011 alongside Yuri Khodjamirian.
It’s returned around 90 per cent since inception, compared with an average gain of about 55 per cent in the IA UK Equity Income sector and a 45 per cent rise in the FTSE All Share.
Performance of fund, sector and index since Dec 2011
Source: FE Analytics
Fans of the portfolio include F&C co-head of multi-manager Gary Potter, who recently pointed to Reid’s “improvement” style – which looks for companies that have already seen catalyst for positive change – as a way the fund has sought for dividend growth.
The most popular UK income fund with managers – and it’s not run by Woodford or Barnett
It’s always interesting to see what professional fund pickers hold in their portfolios to find out if they’ve discovered any hidden gems or, as we looked for in this article, which are the most popular funds.
We looked across funds of funds to find out which is the most popular UK equity income vehicle with multi-managers. We found that the £7bn Artemis Income fund has retained its crown as the most popular, being held by 36 multi-managers.
Source: FE Analytics
Funds from Threadneedle, Troy and Woodford Investment Management have also been popular with multi-managers in this past year, but have a read of the article to see which large funds they appear to have been selling out of.
The best multi-asset funds for a monthly income portfolio
One of the themes FE Trustnet is focusing on is retirement income and is this article we trawled through the four mixed investment sectors to see which funds could be good core options for income portfolios.
The criteria used in the study were fairly rigorous - we wanted funds that paid dividends on a monthly basis, were some of the best in their sector for volatility and maximum drawdown, and have a good performance profile. In some sectors we found several contenders but in IA Flexible Investment peer group we couldn’t really find any options.
From your comments on the bottom of the article, it’s clear that some readers think the selection criteria were a little strict or would be willing to consider quarterly and bi-annual pay outs. We’re going to continue looking at other areas of the funds industry with the same filters, but promise to run some future studies taking your points into account.
