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Woodford’s wins, top-performing funds and UK bulls: Our best stories of the week

03 July 2015

This week, the FE Trustnet team has been looking at the funds with the best performance so far this year, as well as reminders from financial experts to take a long-term investment view and ignore short-term noise.

By Lauren Mason,

Reporter, FE Trustnet

With Greece’s finance minister Yanis Varoufakis proclaiming he would rather cut off his arm than agree to further austerity, it’s fair to say that tensions are running high as Sunday’s referendum looms ever closer.

As the Greek population decides whether to support an EU bailout deal that would grant the country money in exchange for budget cuts and reforms, it seems as though investors are awaiting the result with baited breath and de-risking, with the FTSE 100 index going through ups and downs over the week.

However, there is plenty more going on in the world of investment at the moment apart from the all-consuming Greek debt crisis – and here are some of the best, and arguably more positive, offerings of the week from the team at FE Trustnet.

We hope you have a great weekend.

 

So far so good... The best performing funds of 2015

Using data from FE Analytics, reporter Lauren Mason took a look at the funds that have achieved the best performance so far this year.

Japan, China and specialist Russia and Korea equity funds dominated the top 10. However, the top-performer was the five FE Crown-rated Invesco Korean Equity, which has delivered a whopping 29.83 per cent worth of returns to investors since the start of the year, outperforming its benchmark more than five times over.

Performance of trust vs sector in 2015

Source: FE Analytics

Other funds that fared well included FE Alpha Manager Michael Lindsell’s Lindsell Train Japanese Equity, which returned 25.48 per cent, and curveball Carmignac Ptf Euro Entrepreneurs, which is listed in the IA European Smaller Companies sector.

Just shy of the top 10 list, biotech funds from Pictet and Polar Capital delivered eye-catching performances, as well as several UK smaller companies funds.

 

The stocks powering CF Woodford Equity Income’s first year

On Tuesday, reporter Daniel Lanyon broke down data from Woodford Investment Management to decipher which stocks have been the top contributors to the performance of Neil Woodford’s CF Woodford Equity Income fund in its first year.

The FE Alpha Manager, who is renowned for adopting a high-conviction, contrarian investment technique, has benefitted the most from FTSE 100, FTSE 250, FTSE Aim and US-listed stocks over the last 12 months.

Just five stocks alone have accounted for nearly 9 percentage points of the 20.31 that Woodford has achieved so far: these are Allied Minds, 4D Pharma, Imperial Tobacco, Prothena and Reynolds American.

According to Woodford: “[Allied Minds’] mission is to ‘form, fund, manage and build’ technology businesses using its unparalleled access to the best intellectual property emanating from US universities and other government-sponsored research institutions.”

“In the US, it has few peers, which is one of the reasons it decided to list in the UK where other similar companies are listed.”


 

Ignore the bears – Four reasons why you should be bullish on the UK

Senior reporter Alex Paget spoke to Henderson’s Chris Burvill on Wednesday, who explained why investors should drop their bearish stance towards the UK equity market and look through the short-term noise.

“Nobody likes bad news and there is plenty of it around at the moment. It always seems no-one wants to go out and buy in the midst of bad news but there are two very straightforward advantages to being bullish at this sort of time,” he explained.

“Frequently, the bad news turns better. Now I’m not saying the Greece crisis is anywhere near being solved, but the market worries about these sorts of issues frequently turn on a sixpence.”

“The second point is, it means there are plenty of cynics on the sidelines and cynics on the sidelines is good news because they are waiting for the news to improve and therefore they are waiting to buy markets when the opportunities arise.”

The manager of the £2.3bn Henderson Cautious Managed fund made the additional points that valuations aren’t that expensive on a relative or absolute basis, corporate profits are below trend and the underlying UK economy is improving.

 Why investors shouldn’t be rushing to sell in the market correction

With everybody’s attentions on Greece at the moment, markets across the globe are well and truly taking a hammering.

However, news editor Gary Jackson takes a longer term view of the markets, reminding readers that sell-offs often aren’t a permanent fixture and long-term investors who stomach the ride are likely to be rewarded.

Informed Choice’s Martin Bamford agrees and is calling for investors not to lose momentum and to keep their eye on the long game.

“I don’t think it’s possible to second-guess market events like these. The situation with Greece has been boiling away more or less constantly for years now, only coming to a head in the past few weeks. The market reaction has been as we expected and nothing too dramatic,” he explained.

“When looked back at in the future, things like this appear to be just a blip on the charts. Investors only suffer losses when they sell after markets have fallen and then buy once markets have started to recover.”


 

Marshall-Lee: The emerging markets I’m backing and avoiding

Moving away from developed markets, head of FE Trustnet Content Joshua Ausden spoke to Rob Marshall-Lee, head of emerging and Asian equities at Newton, who warned that being selective between different emerging market countries is fundamental at the moment.

Marshall-Lee also recommended steering clear of Russia and Brazil at the moment – both of which are markets that have been attracting some of the more daring investors recently.

“All countries are not alike, which is why being selective is so important when you invest in companies situated in emerging markets. There are countries like India and the Philippines that look attractive to me right now, whereas I am avoiding Brazil and Russia,” he said.

“Similarly at an industry level, I think banks and commodity producers have big problems but I think that a number of internet companies have massive potential.”

The manager of the Newton Global Emerging Markets fund, who principally considers long-term macro themes when making investment decisions, also said that he sees India and the Philippines as two of the best countries in the world on a five-year perspective.

 

The best-performing investment trusts and sectors of 2015 so far

Over on Trustnet Direct, Anthony Luzio looked at which AIC sectors and the trusts within them that have done the best as we reach the halfway point of the year.

Just as in the IA universe, it was the Japan sector that topped the tables. However, AIC Japan’s gains of 19.25 per cent were almost 6 percentage points higher than those of its open-ended counterpart.

The best-performing Japan trust over this time has been Baillie Gifford Japan, with returns of 22.85 per cent. It has also outperformed over three, five and 10 years, however this strong track record is reflected in the fact it is now trading on a premium of 3.2 per cent. The average discount for the sector is 4.6 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.