Five funds with the wind in their sails

A group of financial advisers reveal to FE Trustnet the funds that are gathering momentum despite being out of favour or relatively unknown as little as 12 months ago.

By Anthony Luzio, Reporter, FE Trustnet
Sunday May 13, 2012

Rathbone Global Opportunities

"One fund I always end up talking to journalists about and that is getting quite a following is the Rathbone Global Opportunities fund," said Darius McDermott, managing director of Chelsea Financial Services.

"It is still quite small, around the £150m mark, and has grown by around £100m over the past year."

"It is top-quartile over one, three and five years and really you can’t ask for anything more than that."

FE Analytics data shows the fund has returned 48.2 per cent over the past three years compared with 27.94 per cent from the IMA Global sector average. It has held up better in the turmoil of the past year as well, losing just 3.39 per cent compared with 8.18 per cent from its sector.

Standard Life Global Absolute Return Strategies

Chris Spear, managing director of Spear Financial, claims that over the past year funds that let him sleep at night have proved their worth. Standard Life Global Absolute Return Strategies is one that falls under that category.

"I used this fund in its early years but I felt it got a bit too big," he said.

"It was flat in the middle of last year when everything was rising, but it has performed very well since then when everything else has fallen. I am conscious about its size and that the FSA questions Absolute Return funds, but I spoke to another adviser recently and they were annoyed they hadn’t put more clients into it last year."

According to FE Analytics, the fund has returned 31.12 per cent since launch in May 2008, compared with 7.49 per cent from IMA Absolute Return. While its sector has lost money over the past 12 months – 1.53 per cent – the fund has returned 5.67 per cent. It currently has more than £10bn AUM.

Schroder Income Maximiser

Richard Hancock, analyst at the Financial Management Bureau, likes the look of a fund that he says has a tried-and-tested method of investing but that has fallen foul of "artificial conditions".

"The Schroder Income Maximiser fund has outperformed over the past six months but slightly underperformed over the past 12," he commented.

"Its strategy is value investing, which is why it hasn’t done so well over the past few years – people haven’t been paying attention to fundamentals. We are living in an artificial market that is being driven by forced buyers and sellers of bonds and equities."

"Over the long-term this is a tried-and-tested method of investing. It is going to take people to stop being worried about the sovereign debt crisis before this returns though. Politicians need to stop messing around with all the austerity measures and pumping QE into the system, so it might be a few years before this method of investing comes back."

FE Analytics data shows the fund is up 23.99 per cent over three years, compared with 37.23 per cent from IMA UK Equity Income. However its 7.34 per cent yield is well above the 4.47 per cent from its sector.

Baring German Growth

Ben Willis, investment manager at Whitechurch Securities, thinks quality cyclical companies are currently good value for the more adventurous investor.

"One fund we hold that is a good barometer for sentiment is the Baring German Growth fund."

"Because it’s got ‘German’ in its name, any news that is positive on the eurozone – such as the LTRO last year – tends to send its value soaring. Then when the Greek prime minister announced he wanted a referendum on the bailout, it sent the value down by 35 per cent. Then it had a massive rally at the start of the year and produced some phenomenal numbers, before it fell again."

Despite its wildly fluctuating price over the past year, Willis believes the sturdy foundations of the fund bode well for the future.

"It is full of quality German companies whose performance is, fair enough, going to be dependent to some extent on global GDP growth, but it is unlikely that any of these companies won’t be here tomorrow. In a normal market it will be subject to the usual vagaries but at the moment its valuation is artificially depressed."

According to FE Analytics, Baring German Growth has returned 35.37 per cent over the past three years, although it has lost 20.65 per cent in the past year.

Invesco Perpetual Income

McDermott said: “It is funny to think it now, but Neil Woodford was actually out of favour last year after his underperformance in the dash for trash in 2009 and 2010, but he came back strongly.”

Willis added: "Even though he is one of the most respected figures in the industry he struggled over the last few years and was heavily criticised. I suppose you don’t get to manage £20bn of cash by worrying about what other people think."

"Invesco Perpetual Income and High Income have had a good last few months and they have a stable dividend and growth. I’ve got my kids’ money invested with him."

On 10 May FE Trustnet revealed that Neil Woodford regained the status of a top-quartile performer over three years.

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John Osborne May 13th, 2012 at 04:01 PM

Describing an underperforming income maximiser fund which by definition gives up some of its growth as income as a "Fund with a wind in its sails" is a bit of a joke and tells a story in itself.
With imminent collapse of euro possible the only wind in sails this summer may be a downdraft, but then advisors still collect the fees.

Theo May 13th, 2012 at 03:05 PM

So Spears are recommending we invest in an abs.return fund, in an under performing discredited sector which FSA wants to ditch, because of its good past performance. He forgets that 25% of funds will show top quartile performance simply by chance. And by "good" I mean relative to its sector. Relative to the FTSE it is no where.

We invest aiming for max profit not for coming top in a failing sector. But I hear many bankers are looking desperately for some where to dump their bonuses.