Funds that have weathered the eurozone sell-off
FE Trustnet takes a look at the UK funds that have managed to effectively protect against the downside since the highs of mid-March.
The recent pull-back in equity markets has seen global indices fall by up to 10 per cent in the last two months. Despite a strong start to the year for the FTSE and S&P 500, most markets are now flat year-to-date, following a breakdown in the eurozone bailout talks. At 5,474 points at the time of writing, the FTSE 100 is currently trading at its lowest point this year.
With some predicting an imminent collapse of the euro
, the uptake of cyclically focused funds in the early weeks of 2012 may well be replaced by a preference for more defensively positioned portfolios that have coped better with the recent turmoil.
Here is a selection of recent top-performers in the popular UK equity sectors:
Cazenove UK Smaller Companies
In an interview with FE Trustnet
back in February, FE Alpha Manager Paul Marriage
said he was unmoved by the position of his Cazenove UK Smaller Companies
fund behind the rallying markets, because he felt a correction was on the horizon.
Three months later and the portfolio is a top-five performer in its UK Smaller Companies sector year-to-date, with returns of 14.45 per cent. While its sector average is down 4 per cent in the last two months, the £127.6m portfolio has positive returns of 0.41 per cent over the period.
Performance of fund vs sector since mid-March
Source: FE Analytics
Marriage, who says that outperforming during down periods has been the key to his stellar long-term track record, doesn’t hold any miners or oil & gas companies, which have been hit particularly hard of late.
According to FE Analytics
, the manager’s four crown-rated fund is a top-decile performer over one-, three-, five- and 10-year periods.
Liontrust Special Situations
and Julian Fosh’s
five crown-rated portfolio is a top-three performer in IMA UK All Companies
since mid-March, with losses of 3.21 per cent – around half as much as its sector average.
The fund’s recent ability to protect against the crash follows a long history of outperforming during down markets; according to FE data, only three funds have been less volatile than Liontrust Special Situations over five years, and it has the third-highest Sharpe ratio, which calculates risk/return.
In a recent note to investors, FE Alpha Managers Cross and Fosh said: "The underlying strength of the global economy remains difficult to read given the exceptional levels of government financial intervention."
"The strength of our investment process, particularly in such a time of uncertainty, is its focus on finding companies that have created strong barriers to competition through their intangible intellectual capital strengths."
"They have good pricing power and many operate in markets that are experiencing structural growth."
Fidelity Enhanced Income
The £47m portfolio, which is headed up by FE Alpha Manager Michael Clark
, is a top-five performer in its UK Equity Income sector over two months and is the least volatile of its kind.
According to FE data, it is down 2.34 per cent since mid-March, compared with losses of 5.32 per cent from its sector average.
Despite its underperformance during the January and February rally, the portfolio’s recent strong run, combined with its robust performance during last summer’s severe sell-off, has seen it surge to the top of its sector over a one-year period, with returns of 3.55 per cent.
Performance of fund vs sector over 1 year
Source: FE Analytics
Clark’s Fidelity Moneybuilder Dividend
fund, which has a similar focus to the Enhanced Income portfolio, was recently identified by FE Trustnet
as a strong alternative to Neil Woodford’s much larger
Invesco Perpetual Income and High Income funds, due to its superior risk/return record in recent years.