The FTSE 100, for example, finally broke through its all-time record then passed the 7,000 mark and eradicated an important psychological barrier. Meanwhile, debt talks in Greece spread fear of a Grexit impact on European markets and have weighed on investors’ minds.
Of course, the subsequent introduction of quantitative easing (QE) in the eurozone dominated headlines and has since caused the market to rally strongly.
Nevertheless, while many headlines have been dedicated to European funds and their liquidity-fuelled market, it has been more niche portfolios which have delivered the best returns for investors so far this year.
Source: FE Analytics
As the table above shows, the miniscule Neptune Frontiers Market fund has been the best performing open-ended fund year-to-date.
The £237.1k fund has been managed by Ewan Thompson since its launch in 2012, over which time interest in the asset class has picked up substantially thanks to the uncorrelated nature of the returns on offer, relative to both emerging and developed markets.
The fund has achieved total returns of 26.36 per cent this year, which is a staggering 10 times greater than the MSCI Frontier Emerging Markets index.
A sizeable 7.1 per cent chunk of Neptune Frontier Markets is weighted in cash. However, its biggest weighting is in the Phillippines at 37.8 per cent and it also holds a decent chunk in Sri Lanka, Kuwait and Argentina.
The next two funds on the list are ones which focus on biotechnology, an area of the market which has thrived over recent years and has become increasingly popular with investors due to the potential growth on offer.
While it delivered huge returns in 2013 and 2014, the IA fund with the second-best performance so far this year is the Pictet Biotech, which was launched by Michael Sjöström in 2007.
The £1.1bn fund focuses on gaining capital growth by investing at least two-thirds of its assets in medical biotech companies which the team think are particularly innovative. This bottom-up approach means that Sjöström hasn’t placed any geographical restrictions on the fund, although it currently has a 85.8 per cent weighting in the US.
The Pictet fund boasts returns of 22.82 per cent since the start of the 2015, which is narrowly ahead of the Nasdaq Biotechnology index.
The third top-performing fund of this year is Polar Capital Biotechnology, which has total returns of 22.25 per cent. However, since the Polar Capital fund was launched in October 2013, it has beaten the Pictet offering by more than 35 percentage points and that is largely due to its bias towards small-cap.
One of the major surprise stories of 2015 has been the performance of Japanese equities, following a tough 2014 when a VAT hike in the spring, concerns about prime minister Shinzo Abe’s structural reforms and the fact the country fell into recession all hurt the market.
However, thanks to Abe’s super majority election victory in December and huge amounts of QE from the Bank of Japan which has further weakened the yen, the IA Japan and Japanese Smaller Companies sectors have been the best performing peer groups so far this year.
Despite that, a Japanese fund doesn’t surface in the list until fourth place in the form of JP Morgan’s £103.9m Japan fund, which has achieved total returns of 22.04 per cent so far this year.
Performance of fund vs sector and benchmark since 01/01/15
Source: FE Analytics
Co-managed by Naohiro Ozawa, Nicholas Weindling and Shoichi Mizusawa, the fund strays significantly from the TOPIX benchmark and therefore has a bottom-decile tracking error of 6.28 per cent.
JP Morgan attributes the fund’s outperformance relative to its benchmark to good stock selection – its top-performing stocks include Laox, a duty-free Japanese store, Don Quijote, a Spanish language school, and Oriental Land, the operator of Tokyo Disney Resort.
Also on the list of top performing funds so far this year are Lindsell Train Japanese Equity, Henderson Japan Capital Global Growth, Aberdeen Global Japanese Smaller Companies and M&G Japan.
While Japan funds feature heavily in the top 20 top-performers, they are competing for space against Russia funds which had a shocking 2014 as the huge fall in the oil price and the Russian central bank’s decision to hike interest rates to 17 per cent caused the country’s stock market to plummet.
However, it has started to rebound and JP Morgan’s £340.7 Russia fund completes the list of the top-five, boasting total returns of 20.65 since the start of the year. These returns are over four times greater than of its benchmark.
Performance of fund vs sector and benchmark since 01/01/2015
Source: FE Analytics
The fund does have an FE risk factor of 210 though, which is unsurprising given the current state of Russia’s economy and geopolitical situation. It’s also worth noting that, since the fund’s launch, it has made losses of 22.56 per cent.
Outside of Japan and Russia, the next most-successful product is the £778.2m Lindsell Train Global Equity fund.
Unsurprisingly, given its manager Michael Lindsell also heads up Lindsell Train Japanese Equity, over a quarter of the fund is weighted in Japan. However, its biggest weightings are in North America at 30 per cent and the UK at 28.9 per cent.
Lindsell only launched the fund in 2011, yet it has already outperformed its peers two-fold since, boasting returns of 90.9 per cent.
Performance of fund vs sector and benchmark since 16/03/2011
Source: FE Analytics
As to be expected due to the group’s style, the bottom-up portfolio is concentrated, with the number of stocks ranging from 20 to 35, and has a very low turnover.
Its top five holdings are Pearson, Unilever, Diageo, Heineken and the London Stock Exchange Group.
The Lindsell Train Global Equity fund is top-decile for its risk adjusted-returns, as measured by the Sharpe ratio. It also boasts a top-decile max drawdown of 12.35, which is 5.26 percentage points lower than its sector average.
Following the long run of Russia, Japan and biotech funds, the five FE Crown-rated Invesco Korean Equity fund has also done well since the start of the year.
Managed by Simon Jeong since 2006, the £197.8m fund aims for long-term capital growth by investing either directly or indirectly in Korean companies or securities.
Not only does the fund have a solid long-term track record of outperformance, it has particularly thrived year to date, providing total returns of 17.35 per cent, which is 6.48 percentage points above its benchmark.