This week marked the one year anniversary of the FTSE’s record high – and what a 12 months it has been. 
Two oil price collapses, a crash in the Chinese equity market and a surprise devaluation in the renminbi, a new ‘Black Monday’, the almost baffling rise of Donald Trump and Leicester City seven points clear at the top of the Premier League with just three games to play.
Back to markets and the only real major talking point in regard to the UK has been earnings reports from the banks and it appears RBS lost £1bn last quarter. It means RBS, which was bailed out by the tax payer during the crisis, has now racked up more than £50bn in losses since the crisis after eight straight negative years.
In an article on Tuesday, we will be taking a closer look at the funds most exposed to the beleaguered bank.
On the editorial desk, we have tackled some of the biggest talking points of the last month or so as well as a special day of copy looking at the impact charges have on an investors’ returns.
What is the maximum you would pay for an active UK equity fund?
We start with our charges day and in this article news editor Alex Paget looked at the results of one of our most recent polls.
In it, we ask how much you would pay for an active UK fund in terms of an OCF and of the 2,600-odd who responded, 60 per cent said they wouldn’t back a manager if the charges were above 1 per cent.
This makes sense looking at historical performance as the cheapest funds have outperformed most expensive rivals in all three of the major UK equity sectors in the IA universe over the past five years.
Performance of most and least expensive UK funds over 5yrs
Source: FE Analytics
However, there have been exceptions to the rule and so Premier’s Simon Evan-Cook argues that while investors should take charges into consideration, they shouldn’t be the determining factor behind an investment decision.
“If Fund A was slightly better than Fund B, but Fund A was considerably more expensive, to the point of making it an inferior fund, then we would go for fund B,” Evan-Cook said.
“So far, so common sense. But what we can’t understand is investors who would look to save, in inverted commas, 0.2 per cent by backing an inferior manager, who then goes onto underperform the more expensive, but better, manager by 3 per cent a year for the next 10 years.
He added: “That is not saving money, it is losing it.”
As part of a series of articles that day, we also highlighted five top-performing funds that aren’t charging over the odds and the large funds that still charge more than a 1 per cent OCF.
How the biggest UK funds really stack up when it comes to paying income
The IA UK Equity Income sector has returned to the headlines in recent weeks after it emerged that the Investment Association is looking into the requirement for members to yield 10 per cent more than the FTSE All Share.
A consultation on the rule – which has led to the expulsion of several high-profile funds including the flagship offerings from Invesco Perpetual – is looking at how else membership of the sector could be determined. One option suggests that funds could publish extra information to show their income-paying credentials to the end investor.
With metrics such as net yield, income growth, total returns, volatility and absolute net income over five years on an initial investment of £100 being among those suggested as data points for investors to look at, we’ve ran the numbers on five of the biggest equity income funds to see how useful this would be.
Click on the link above to see a gallery-style article showcasing this information on the likes of Invesco Perpetual High Income and Trojan Income.
Star manager Crispin Odey has had a ‘shocker’ so far in 2016 as his long/short Odey Swan is down 30 per cent since the start of the year.
Performance of fund versus index in 2016
Source: FE Analytics
Odey’s highly ‘cautious’ positioning has been the primary reason for those falls, with shorts in China-related companies hurting the portfolio as well as other big bear calls. In his most recent note to investors, the FE Alpha Manager explained his thoughts on the market.
“At which point this was no longer an investment market but a battlefield. On the day that Draghi came out with his massive market support operation, the stock markets rose 2.5 per cent and then closed down 1.5 per cent on their lows. Imagine how painful it was to see the markets bounce the next day and celebrate his success. At that point I reduced the short book by a third and the long book by 10 per cent,” Odey said.
Given the high-profile nature of the manager, in this article, senior reporter Daniel Lanyon asked the questions – should investors sell or buy more of the fund?
Most of the wealth managers he spoke to were positive on the fund as a result of its falls and ability to hedge against a potential market crash, but Hawksmoor’s Ben Conway was a little less optimistic.
“Were his views to play out, I am sure this fund will make back the losses incurred in the last year and more. You have to ask yourself whether you agree with Odey – if you don’t, then you have to question why you’re holding it.”
GARS: How we’re turning our performance around this quarter
In a quarterly update from Standard Life GARS, multi-asset investment director Adam Rudd explained which positions have fared well for the fund and which holdings have contributed to the fund’s underperformance.
The most well-known absolute return vehicle on the market is immensely popular with investors and has grown to more than £26bn in size since its launch in 2008. However, it has raised some eyebrows recently due to a bout of underperformance versus the FTSE All Share, although it must be noted that the fund aims to provide a positive return over rolling three-year periods.
Rudd said that global equity plays have been the biggest negative contributors over the last quarter, with markets delivering choppy sideways performances since the start of the year. One market that bruised the fund in particular was Europe.
“Although global equities fell during the first part of the quarter and then subsequently rebounded – European equities, due to the strength in the euro, have fared less well than the rest of equities did in the subsequent rebound so that still contributed negatively to the GARS portfolio,” he explained.
Why long-term investors should avoid oil at all costs
In this article, Wolfgang Bauer, deputy manager of the M&G Global Corporate Bond fund, made the case for why the rate of innovation in solar power and electric cars will make fossil fuels redundant sooner rather than later.
He added that the reluctance of Opec nations to cut oil production reflects an acceptance that the dominance of this commodity is over and that these countries want to get what money they can for the raw material before it becomes obsolete.
Bauer says this view is backed up by two names synonymous with gigantic fortunes built on the exploration of crude oil: the crown prince of the Saudi empire and the Rockefeller Foundation.
“The Rockefeller Family Fund just announced its intent to sell down all its holdings from Exxon Mobil, a direct descendant of John D Rockefeller’s Standard Oil, and from other firms related to fossil fuels, stating that ‘it made little sense – financially or ethically – to continue holding investments in fossil fuel-related companies’,” he explained.
“At pretty much the same time, the deputy crown prince of Saudi Arabia made public its plans to launch a $2trn investment fund. As Saudi Arabia IPOs its oil and gas, what it wants to do is shift away from oil, setting the course for the country’s post-oil future. It is not a ringing endorsement of the oil industry.”