As a means of nostalgia and to satisfy curiosity, FE Trustnet explores the best-selling products across the major platforms in the run-up to 2014’s ISA season and see how they are performing now.
Newton Global Income
Trustnet Direct only launched in March last year but one of the most popular funds in the platform’s early days was Newton Global Higher Income, which has since been renamed Newton Global Income.
The £4.6bn fund, which has been managed by James Harries since November 2005, has returned 14.18 per cent over the past year, placing in the second quartile of the IA Global Equity Income sector where the average fund made 11.97 per cent.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
Harries (pictured) runs the portfolio using Newton’s thematic approach, where trends identified by the group guide the manager’s stock selection in areas that are likely to experience superior growth. It also looks for companies that pay dividends which are 25 per cent higher than FSTE World’s yield.
The fund, which appears on the FE Research Select 100 and holds an ‘AA’ rating from Square Mile, is cautiously positioned.
According to the FE Research team: “Although technology stocks have continued to make up more of the portfolio, supported by their high cash balances and increasing pay outs, the fund remains otherwise relatively cautious in its positioning, avoiding financials and favouring utilities.”
“The managers are not convinced by the supposedly strong recovery in developed markets and so are very careful in their stock selection. Consequently income payouts should play an increasing role in investors’ total returns.”
Newton Global Income has a clean ongoing charges figure (OCF) of 0.80 per cent and yields 3.56 per cent.
Marlborough Special Situations
The Share Centre’s best-selling fund at the start of 2014 was Marlborough Special Situations, an £843.9m fund which specialises in growth and is run by Eustace Santa Barbara and FE Alpha Manager Giles Hargreave.
Over the three years before April 2 2014, the fund made total returns of 62.63 per cent, therefore beating its peers who generally enjoying a bull run, by 6.52 percentage points.
It’s not difficult to see why the fund was so popular last year.
In contrast, the fund has made only 1.06 per cent returns over the last 12 months after UK smaller companies endured a tough time on the back of numerous headwinds – not least profit-taking from investors after the strong previous years. However, its small gain compares well with its sector, where the average peer lost 2.61 per cent.
Performance of fund vs sector over 1yr
Source: FE Analytics
Investors looking at the longer term picture, however, Marlborough Special Situations is more promising. Since its launch in 1995, the fund has racked up huge returns of 2,083.21 per cent, which is more than four times that of its average peer.
The fund has also performed well over shorter time frames and boasts a top decile Sharpe ratio of 1.2 per cent and a top decile max drawdown of 16.34 per cent over five years.
Also in the FE Select 100 list, the research team said: “Marlborough Special Situations is one of the strongest UK funds in terms of performance and quality of investment team. The analysts collectively have 125 years of market experience between them, while Hargreave started his career in 1969.”
“It is unusual to have such small amounts of money invested in high-conviction positions, but as the share prices of smaller companies can fluctuate more violently, this diversity limits the impact of a single high-risk stock.”
Marlborough Special Situations has a clean OCF of 0.80 per cent.
Liontrust Special Situations
Liontrust Special Situations, which was Bestinvest’s top-selling fund last year, made a 7.67 per cent return over the last 12 months. It also had top decile annualised volatility of 10.45 per cent and a top decile Sharpe ratio of 0.44.
Performance of fund vs benchmark and sector over 1yr
Source: FE Analytics
The £1.5bn fund is managed by FE Alpha Manager duo Julian Fosh and Anthony Cross, and is a mix of the Liontrust UK Smaller Companies and the Liontrust UK Growth funds’ best ideas.
The fund covers the entire UK equities universe, including small, medium and large businesses. Fosh and Cross will only hold stocks that can secure their future profits, for example, companies that can produce a contract confirming a regular income stream or own patents and copyrights for the products they manufacture.
Square Mile said: “This is a very well considered and defined investment process. The process steers the managers towards relatively steady businesses that are gradually growing and generating high levels of cash.
“This is not an income strategy as such but the companies in the portfolio tend to generate a high level of dividend growth over time as shareholders participate in the companies' success. Often these types of business are not seen as being the most dynamic of firms but they continually chug away generating attractive returns.”
Some 35.3 per cent of the fund’s assets are currently allocated to blue-chip stocks. A further 32.4 per cent are in FTSE 250 companies and 19.1 per cent are allocated to FTSE AIM stocks.
It’s unsurprising that this fund was so popular with investors last year, as for the three years before April 2 2014, the fund had made a total return of 52.39 per cent, beating its peer average by 16.67 percentage points.
The fund has a clean OCF of 0.87 per cent and yields 1.62 per cent.
Henderson Cautious Managed
The Henderson Cautious Managed fund, which proved to be the most popular on Cofunds in early 2014, hasn’t had the best year.
With total returns of 5.72 per cent over the last 12 months, the fund underperformed compared with the FTSE All Share and made 2.5 percentage points less profit than its peers on average.
Performance of fund vs sector and benchmark over 1yr
Source: FE Analytics
Manager Chris Burvill’s wary approach has proven to be lucrative over the long term, providing total returns of 41.34 per cent over five years, which is 9.51 percentage points more than its sector average.
As expected with a cautious investment technique, Burvill sticks mostly to blue chip stocks or UK government debt. He is helped with the bond section of the portfolio by FE Alpha Managers Jenna Barnard and John Pattullo.
The FE Research team said: “Chris Burvill has a very good track record on this fund which he has been running since 2003. He has skilfully moved the portfolio between equities and bonds to produce good returns for investors and avoid the worst market falls.”
“He does have a tendency to take more risk than most of his peers by buying more equities, however, but has made that risk count with extra returns.”
Henderson Cautious Managed has a clean OCF of 0.72 per cent and yields 3 per cent.
R&M UK Equity Smaller Companies
One of FundExpert.co.uk’s best selling funds, R&M UK Equity Smaller Companies has beaten both its sector and its benchmark over the last year, producing a total return of 1.13 per cent despite the profit-taking in this part of the market.
Performance of fund vs sector and benchmark over 1yr
Source: FE Analytics
The five FE Crown-rated fund has been managed by FE Alpha Manager Philip Rodrigs since September last year, but he is still working closely alongside former manager Dan Hanbury.
Rodrigs had eight successful years with Investec Asset Management before taking the helm of the now £848.8m fund, which has a Square Mile rating of ‘AA’.
The fund aims to outperform the Numis Smaller Companies Index by 3 per cent per annum, and invests primarily in UK equities which are in the bottom 10 per cent of the UK stock market in terms of capitalisation.
R&M UK Equity Smaller Companies achieved this in 2014, where it’s 4.39 per cent gain comfortably beat the 1.85 per cent fall in the index. Square Mile point out that the fund adopts a clear and well-defined investment process and is run by a highly-skilled manager and team.
What’s more, R&M UK Equity Smaller Companies achieved a top decile max drawdown of 9.73 per cent over the last 12 months.
The fund has a clean OCF of 0.95 per cent and yields 0.95 per cent.
Schroder UK Smaller Companies
Rosemary Banyard and FE Alpha Manager Andrew Brough’s Schroder UK Smaller Companies was the best selling fund on TD Direct Investing at the start of 2014.
Since this time last year, the fund has posted a total return of 1.28 percent more total returns – outpacing both its average peer and its FTSE Small Cap benchmark.
Performance of fund vs sector and benchmark over 1yr
Source: FE Analytics
Over the last year, the fund has achieved a reasonable second quartile max drawdown of 11.76, which is 1.14 percentage points less than the sector average.
The £501.5m fund has had a strong run over the longer term, producing 128.75 per cent total returns over five years. As a result of its consistent longer-term performance, the fund has made its way into the FE Research Select 100 list.
Last year, the FE Research team said: “This is one of the best-performing funds in its sector, having returned 10.5 per cent a year since its launch in 1987. Brough and Banyard spend a great deal of time building relationships with company directors, as they believe their skill is what will make the business a success.”
Schroder UK Smaller Companies has a clean OCF of 0.91 per cent.