UK equities were set to endure a turbulent time this year from the offset, with commodity prices collapsing, concern about interest rate rises and the UK general election on the horizon.
The election, which was described by media as the least predictable in generation, sparked fear in the markets as people questioned whether it would result in a hung parliament and another coalition government – the exact make-up of which was difficult to forecast.
However, following the announcement of a Conservative majority government, confidence crept up once more with many fund managers adding positions to their portfolios just hours after the results were announced.
As Saturday marked the six-month anniversary of a Conservative government, FE Trustnet has taken a look at the funds and trusts in the major UK sectors that have fared the best and the worst under Tory rule.
It must be noted, though, that because of headwinds in the market this year including the sell-off driven by China fears and changes in sentiment as investors watch central banks for clues to the future of monetary policy, it is challenging to solely analyse the impact of the UK government.
Table of top-performing UK funds since general election
Source: FE Analytics
In terms of open-ended funds, it will come as no surprise that the IA UK Smaller Companies sector has dominated in terms of returns. This area was left relatively unscathed by the China-induced market sell-off, which hit the internationally focused FTSE 100 much harder.
The top performer since the election this year has been MFM Techninvest Special Situations, which has returned 21.78 per cent to date.
Performance of fund vs sector since 2015 election
Source: FE Analytics
Managed by Conor McCarthy and Darren Freemantle for more than a decade, the £7.1m fund adopts a value-based approach and focuses on either new and emerging growth stocks or recovery situations that have the potential to improve.
Because of this, the two FE Crown-rated fund might not be for the faint-hearted as it is in the bottom quintile since the election for its annualised volatility compared to its peers in the IA UK Smaller Companies sector.
MFM Techinvest Special Situations has a clean ongoing charges figure (OCF) of 1.77 per cent.
The next fund on the list for its performance since the election is ConBrio Sanford Deland UK Buffettology, which has returned 15.21 per cent and outperformed its average peer in the IA UK All Companies sector by 17.17 percentage points.
While the £22m fund is able to invest across the market cap spectrum, it holds large weightings in AIM stocks, with the likes of Bioventrix, Scapa Group and Mattoli Woods making up the 28-stock fund’s top three holdings. It also has 7.17 per cent in cash.
Other IA UK All Companies funds that have done particularly well since the election are Unicorn UK Growth, MFM Slater Growth and MFM Slater Recovery, which are in third, sixth and eighth place respectively for their returns.
Like ConBrio Sanford Deland UK Buffettology, all three are fairly small in size and have significant weightings in AIM and smaller stocks.
After Unicorn UK Growth, the next top-performing fund is Standard Life Investments UK Smaller Companies, which has been managed by FE Alpha Manager Harry Nimmo since 1997.
Since the UK general election, it has returned 13.55 per cent, more than doubling the performance of its sector average.
Performance of fund vs sector since 2015 election
Source: FE Analytics
The £1.2bn fund has 53 holdings and is currently 58.2 per cent invested in the FTSE 250 index, 12.5 per cent in the FTSE Small Cap index and 29.3 per cent in unlisted companies.
Standard Life Investments UK Smaller Companies has a clean OCF of 0.99 per cent.
Other IA UK Smaller Companies fund sitting on strong gains since the election are TB Amati UK Smaller Companies, AXA Framlington UK Smaller Cos and Threadneedle UK Smaller Companies.
In terms of UK investment trusts, it has been the smaller companies vehicles that have mostly delivered the best returns since the election, having provided a sector average return of 12.47 per cent.
Table of top-performing UK trusts since general election
Source: FE Analytics
The top performer though is Acorn Income, which sits in the IT UK Equity & Bond Income sector and has returned 24.6 per cent, outperforming its average peer by 19.34 per cent. It is managed by Premier’s Paul Smith and Unicorn’s Simon Moon and Fraser Mackersie.
The four FE Crown-rated trust is £58m in size and holds a 73.6 per cent weighting in equities, 25.4 per cent in fixed income securities, 6 per cent in convertibles and 4 per cent in cash.
The portfolio is currently spread across nine different sectors and its largest holdings are packing and label company Macfarlane Group, industrial electronics company Acal, infrastructure group Hill & Smith and real estate investment trust Primary Health Properties.
Acorn Income is 35 per cent geared, yields 3.6 per cent and is trading on an 8 per cent discount. It has a fixed management fee of 0.7 per cent of the company’s total assets per annum, as well as a performance fee of 15 per cent which is charged on any excess above 10 per cent per year.
The next top-performing trust doesn’t reside in the IT Smaller Companies sector either but has done well from the outperformance of more domestically focused mid-caps – the five FE Crown-rated JP Morgan Mid Cap investment trust.
It is managed by Georgina Brittain and Katen Patel and, since the election, has returned 24.04 per cent, outperforming its peers in the IT UK All Companies sector more than eight times over.
Performance of trust vs sector and benchmark since election
Source: FE Analytics
Almost a third of the trust is in financial equities while 25. 8 per cent is in services, 20.8 per cent is in industrials and 10.2 per cent is in consumer products.
JP Morgan Mid Cap is geared 12 per cent, yields 2.5 per cent and is trading on a 2.9 per cent discount. It also has an ongoing charge of 0.95 per cent.
Standard Life UK Smaller Companies and the Small Companies Dividend Trust are in third and fifth place respectively for their post-election performance, having both delivered in excess of 20 per cent.
In fourth place is Miton Asset Management’s Diverse Income Trust, which has been managed by Gervais Williams and Martin Turner since its launch in 2011.
The five FE Crown-rated trust is a constituent of the IT UK Equity Income sector and has a 38.5 per cent weighting in FTSE AIM stocks, 21.7 per cent in the FTSE 250 index and 19.8 per cent in FTSE Small Cap companies. Its largest weighting is also a FTSE 100 Put Option at 2.8 per cent, which hedges the trust against the blue-chip index.
The £365m trust is trading on a 3.1 per cent premium, yields 2.7 per cent and is 1 per cent geared. It also has an ongoing charge of 1.26 per cent.
Other trusts that have done particularly well since the UK general election are JP Morgan Smaller Cos, the Athelney Trust and BlackRock Smaller Companies, all of which are in the IT UK Smaller Companies index.
