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The funds that have already made double-digit returns in 2015

23 March 2015

The FTSE 100 breaking through the psychologically important 7,000 barrier captured the attention of investors last week, but FE Analytics shows funds from a range of assets classes have made even higher gains over 2015 so far.

By Gary Jackson,

News Editor, FE Trustnet

Last week the FTSE 100 passed above the 7,000 mark, which was welcome milestone for UK investors but a less notable achievement on the global stage where several markets seem to have been continually reaching new record highs.

As the below graph shows, the FTSE 100 has risen more than 30 per cent over the past three years but this is dwarfed by the gains of some of its peers. The S&P 500 has surged 66.74 per cent thanks to the US’ strong economic backdrop while the Nikkei 225 has risen 42 per cent on the back of the ambitious Abenomics stimulus programme.

Even European equities have managed to outpace the FTSE, as Mario Draghi’s pledge to do “whatever it takes” to save the eurozone and the European Central Bank’s eventual move into flown-blown quantitative easing (QE) overcame negative sentiment caused by the debt crisis and economic malaise.

But emerging markets have been left in the shadows even by UK stocks, as they faced multiple challenges such as the end of QE in the US, slowing growth rates in the economic powerhouse of China and plunging commodity prices.

Performance of indices over 3yrs

 

Source: FE Analytics

Despite the FTSE 100 grabbing headlines by recently breaking through the psychologically important 7,000 barrier and having a better 2015 than US equities, it has still lagged some parts of the global market over this year as well.

Tom Stevenson, investment director at Fidelity Personal Investing, said: “The FTSE 100 finally cracks through the 7,000 barrier, but no-one should be celebrating. It’s been nearly 17 years since it first broke 6,000 on 1 April 1998 – a long wait for round-number watchers.

“The performance of the FTSE 100 is even more disappointing when you consider that the growth of the UK market has progressively slowed since its launch in 1984. While it took just three years to double the index between 1984 and 1987, it was nearly a decade for it to double again between 1987 and 1996. Even if the market races ahead from 7,000 to 8,000 it will have taken the best part of 20 years for it to double for a third time.”

So where has done genuinely well since the start of the year?

Japanese equities have had a strong start as have European stocks, while portfolios focused on healthcare have benefitted from another strong run. FE Analytics show 419 funds have posted double-digit gains over the year to date, compared with the 8.01 per cent rise in the FTSE.



Source: FE Analytics

As you can see from the above table, biotech funds are well represented in the double-digit performers, with three of the top four slots taken by portfolios concentrating on this part of the market.


David Pinniger's Polar Capital Biotechnology fund leads the pack but there’s mere basis points between it and Michael Sjostrom’s Pictet Biotech fund in second place.

Polar Capital Biotechnology is more nimble than the bulk of its peers with assets of just $40.9m. Its investment team has more than 60 years of experience in biotechnology and screens potential holdings on characteristics such as diversified earnings, clinical development and technology platforms.

Pictet Biotech, meanwhile, has a portfolio that is $1.7bn in size and tends to invest at the large-cap part of the market, with major holdings including Biogen Idec, Celgene and Amgen. The fund has returned 176.75 per cent over three years, with 47.79 per cent coming in the past six months.

Biotech has had a strong run over recent years, leading some to ask if the sector has entered bubble territory – especially given several corrections, including one in October last year. However, Pinniger maintains that biotech companies offer “strong defensive growth at attractive valuations”.

“In a market and economic environment where investors are struggling to find growth opportunities, and where questions are being asked of stock market valuations given economic fundamentals and possible imminent reversals in macro-economic monetary policy, biotech’s defensive growth profile is an attractive proposition,” he said in his last investor update.

“That means pullbacks continue to be bought into aggressively, especially as the sector’s leading companies continue to beat expectations on financial performance.”

Other healthcare funds in the list of 2015’s double-digit returners include AXA Framlington Biotech, Polar Capital Healthcare Opportunities, AXA Framlington Health and Fidelity Global Health Care.

Performance of funds vs index over 2015

 

Source: FE Analytics

Ewan Thompson's Neptune Frontier Emerging Markets fund has had a strong 2015, despite emerging markets having a tough time over recent years. The fund, which aims for capital growth with the potential for income, has returned 38.90 per cent since launch in December 2012, outperforming the MSCI Frontier Emerging Markets index’s 19.15 per cent gains thanks to a strong rally over the past couple of months.


But it is Japan funds that dominate the list of portfolios witnessing a flying start to the year.

Naohiro Ozawa, Nicholas Weindling and Shoichi Mizusawa's £97.8m JPM Japan fund is in fifth place with a 21.68 per cent return. The fund offers broad exposure to the Japanese market with 32 per cent in mega-caps, 25 per cent in large-caps and 42 per cent in mid-caps.

It is currently first quartile in the IA Japan sector over one, three and five years, as well as over three and six months. However, its aggressive approach means it’s one of the most volatile members of its peer group and tends to lose more than its rivals in down markets.

Henderson Japan Capital Growth, M&G Japan, Aberdeen Global Japanese Smaller Companies and Lindsell Train Japanese Equity are also found in the 10 highest returns, while there are 76 funds focused on the asset class that have posted double-digit returns so far.

Performance of funds vs sector over 2015

 

Source: FE Analytics

Despite its economy still being on shaky ground, Japan has been a key beneficiary of the stronger dollar as it has boosted the returns from the country’s exports. Meanwhile, the country is still running a massive QE programme and is seen as one of the few areas of the global stock market that still look relatively cheap.

European equity funds are also well represented in the list. Portfolios invested in this area really took off after 22 January, when Draghi announced that the central bank will launch a €60bn-a-month bond-buying programme to kick start the eurozone economy and tackle deflation.

Pictet Small Cap Europe, GS Europe Equity Partners Portfolio and GAM Star European Momentum are some of the funds that have seen the biggest bounces on the back of this news.

When it comes to the UK, about 35 funds have been able to make double-digit gains. These include Ardevora UK Equity, which is up 13.78 per cent, Baillie Gifford UK Equity Alpha, up 12.03 per cent and Kames UK Opportunities, up 11.63 per cent.

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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.