Hindsight is a wonderful thing, especially in the world of investments. 
Certainly, anyone who has money in the market would love to have the ability to go back and change their previous decisions – whether that was to buy that supposed ‘dog’ fund which went on to shoot the lights out or sell that once top-performer which subsequently lost you 50 per cent.
Therefore, given it has been a very eventful five years for global financial markets – thanks to a sovereign debt crisis in the eurozone, unlimited amounts of quantitative easing, collapsing commodity prices and emerging market woes – we thought it would be interesting to see which funds had the highest number of factsheet views in January 2011 and see how they have since performed.
Of course, it must be made clear that readers will have been viewing these factsheets for very different reasons, whether that was to keep an eye on performance, considering buying or possibly even selling.
Interestingly, the most popular factsheet on this website five years was the JPM Natural Resources fund’s.
In truth, though, it comes as little surprise that the fund had such a following. Under the stewardship of Ian Henderson and his team, the then £2.5bn fund had been the second best performing portfolio in the entire Investment Association universe on a 10-year view with gains of 845 per cent.
Clearly, JPM Natural Resources had benefitted from the commodity super-cycle and huge growth in emerging markets. However, between January 2001 and January 2011 it effectively doubled the returns of its benchmark.
Nevertheless, investors will no doubt know that a lot has changed for JPM Natural Resources since then.
First and foremost, commodity prices have collapsed because of oversupply and slowing emerging market growth. A new manager is at the helm in the form of Neil Gregson and, most importantly, it has posted eye-watering losses thanks to its area of focus.
According to FE Analytics, it has lost 75 per cent over the last five years – making it the sixth worst performing fund in the Investment Association universe.
Performance of fund versus index over 5yrs
Source: FE Analytics
As a result of that performance (which includes five straight calendar years of double-digit losses and an 12 per cent fall already in 2016) along with significant selling on the part of investors, its AUM now stands at £462m.
Of course, the outlook for the likes of mining and energy is still very murky given China’s woes and other macroeconomic losses, but given the extent of JPM Natural Resources’ losses, it is very understandable why more and more managers are taking a contrarian punt on commodity-related companies.
Next up, we have a real household name within the industry.
Under the guidance of star manager Neil Woodford, Invesco Perpetual High Income had rocketed to the position of the largest UK equity income fund with an AUM of £9.9bn thanks to its stellar risk-adjusted performance.
For example, due to Woodford’s avoidance of tech stocks during the dotcom boom and subsequent bust, his decision to stay away from the banks before the global financial crisis and focus on old economy stocks such as tobacco and healthcare, Invesco Perpetual High Income had been the best performer in the sector in January 2011 on a 10-year view with gains of 125 per cent.
As a point of comparison, the FTSE All Share had made 46.48 per cent.
Performance of fund versus sector and index between Jan 2001 and Jan 2011
Source: FE Analytics
That included eight consecutive calendar years of outperformance relative to the FTSE All Share between 2001 and 20008. However, Invesco Perpetual High Income had just underperformed in the two previous years, which may have been why so many readers were viewing its factsheet in early 2011.
Again there have been some big changes in regard to Invesco Perpetual High Income over the last five years, though none have been as disastrous as those which hit JPM Natural Resources.
Woodford’s high profile departure from the group is the most obvious of those, but due to its failure to meet the Investment Association’s yield criteria, the fund now finds itself in the IA UK All Companies sector.
Nevertheless, the now £12.6bn fund has beaten the FTSE All Share by more than five times over five years and is comfortably outperforming since FE Alpha Manager Mark Barnett took charge of the portfolio in March 2014.
Aberdeen Emerging Markets Equity
Emerging market equities were all the rage this time five years ago owing to the huge boom in the developing world – and Devan Kaloo’s Aberdeen portfolio was the preferred choice for most who wanted to take advantage of that trend.
Aberdeen Emerging Markets had also massively benefitted thanks to Kaloo and his team’s preference for quality growth companies, which had received a boost from the increasingly wealthy emerging market middle class.
In the 10 years previous to January 2011, the then £2.1bn fund had been the best performing portfolio in the IA Global Emerging Markets sector (which had been the second best performing peer group) with gains of 420.36 per cent. Its benchmark had gained 285.43 per cent, as a point of comparison.
Yet, like with JPM Natural Resources, the tide has since turned for this once widely held fund.
Performance of fund versus sector and index over 5yrs
Source: FE Analytics
As we all know, emerging market equities have had a shoddy time of it over the past five years as China’s growth has slowed, commodity prices have fallen, there have been sporadic bouts of geo-political tensions and many have become concerned about the impact of tighter US monetary policies on the asset class.
As the graph above shows, Aberdeen Emerging Markets Equity has fared better than most during those turbulent times. However, those five years mask third quartile figures over one and three years and a particularly difficult 2013 with losses of 10 per cent due to the quality/growth style falling out of favour.
The now £1.3bn fund is soft-closed, but many are foreseeing a turnaround in performance for this former heavyweight given the depressed sentiment towards emerging markets.
BlackRock Gold & General
It’s fair to say that gold was an asset allocator’s best friend during the first decade of this century.
The price of the precious metal sky-rocketed from $260 in January 2001 to $1,400 10 years later and, therefore, it comes as little surprise that this fund was so popular at that time.
The then £3.2bn BlackRock Gold & General fund had been the best performing portfolio in the whole Investment Association universe over 10 years at that stage, having returned more than 1,000 per cent. Therefore, many may have been hoping for more of the same when they were viewing its factsheet.
Little did they know, however, that the gold price was in bubble territory and would peak at $1,837 in July that year.
Given the price of gold has since fallen to $1,083 on falling inflation expectations and the fact it yields nothing, the BlackRock fund has had an incredibly difficult time given it concentrates on gold mining equities – which are seen as a leveraged play on physical gold.
In fact, BlackRock Gold & General has since lost 65 per cent over five years – though that means it has beaten the FTSE Gold Mining index and other gold funds. To assess just how bad this five years has been for gold funds, it’s worth looking at BlackRock Gold & General’s performance on a 15 year view.
Performance of fund versus sector and index over 15yrs
Source: FE Analytics
Unlike emerging markets and natural resources, however, very few market commentators are expecting a significant ramp up in the performance of gold or gold mining equities over the medium term.
M&G Recovery
The final fund on the list was certainly one of the darlings of the industry this time five years ago.
With Tom Dobell and his value-orientated strategy at the helm, M&G Recovery had beaten both the IA UK All Companies sector and the FTSE All Share in each of the previous 10 calendar years. That meant it sat comfortably in the peer group’s top quartile on a cumulative decade-long view with returns of 117.28 per cent.
That performance led to a surge in popularity as the then £5.9bn would go on to grow to more than £8bn by 2012.
As has so often been the case in this article, though, Dobell’s fortune have since taken a dramatic turn for the worse.
It is now the second worst performing portfolio in the sector over five years with losses of 8.91 per cent, compared to a gain of 25 per cent from the wider market. It is also bottom decile over one and three years owing to its underperformance in 2011, 2012, 2013, 2014, 2015 and so far in 2016.
Performance of fund versus sector and index
Source: FE Analytics
As a result, the fund is now bottom quartile over 10 years and now second quartile since Dobell has been manager despite his stellar first 10 years.
Now, there have been a number of potential reasons for this underperformance.
Value, as a style, has massively struggled relative to growth which has been the primary driver but Dobell admits there have been several stock-specific issues along the way. Size may have also played a part (though M&G denies this) and the fund has now shrunk back down to £3.7bn, which represents 50 per cent AUM fall in just three years.
Given value has underperformed and Dobell has a high weighting to commodity stocks, though, does the future now look brighter for M&G Recovery?
