While the dip in the markets has spooked many investors, the majority of funds have hung on to the strong returns they saw in the early stages of 2013.
According to FE data, of all the equity-focused IMA sectors, only IMA Global Emerging Markets has lost money so far this year. The worst performer overall – IMA UK Gilts – has lost just 3.63 per cent.
More than half of the 27 IMA sectors have made double-digit returns so far this year, and four of these have made more than 20 per cent. Considering that money sitting in a bank would have made just 0.25 per cent over the period, it has not been a bad year by any means.
Top-10 best-performing sectors in 2013
| Name | 2013 |
|---|---|
| IMA Japanese Smaller Companies | 29.36 |
| IMA North American Smaller Companies | 24.54 |
| IMA Japan | 24.12 |
| IMA North America | 21.72 |
| IMA Global Equity Income | 13.67 |
| IMA European Smaller Companies | 13.56 |
| IMA Global | 13.43 |
| IMA Technology & Telecoms | 13.03 |
| IMA Europe Excluding UK | 12.14 |
| IMA Europe Including UK | 11.87 |
Source: FE Analytics
IMA Japanese Smaller Companies has been the best performer overall, with returns just shy of 30 per cent. It has also been a strong year for funds in IMA North American Smaller Companies, IMA Japan and IMA North America.
The best-performing fund overall is Legg Mason Japan Equity, which has delivered an impressive 53.75 per cent since 1 January. Hideo Shiozumi’s £207m portfolio sits in the IMA Japan sector, but has a bias towards domestic small caps.
Performance of fund vs sector and index in 2013
Source: FE Analytics
The fund has lost around 17 per cent since its peak back in May, but this has not been enough to knock it off its perch.
Other standout performers with a Japan and US focus include Invesco Perp Japanese Smaller Companies, Legg Mason Capital Management Opportunity and FF&P US Smaller Cap Equity, which have all delivered in excess of 35 per cent.
While equity markets have had a good year in general, there have been two notable exceptions: those with an emerging market focus and those with a commodities or natural resources focus.
High-profile names such as BlackRock Gold & General, Aberdeen Emerging Markets and First State Indian Subcontinent have all lost money this year.
The little-known Guinness Alternative Energy fund is the exception to the exception however; our data shows it has managed 41.09 per cent so far this year, making it one of the top-three best performers of 2013.
Top-10 best-performing funds in 2013
| Name | 2013 returns (%) |
|---|---|
| Legg Mason - Japan Equity | 53.75 |
| Invesco Perp - Japanese Smaller Companies | 43.06 |
| Guinness - Alternative Energy | 41.09 |
| Legg Mason - Capital Management Opportunity | 40.17 |
| FF&P - US Small Cap Equity | 36.62 |
| AXA - Framlington Biotech | 35.8 |
| Baillie Gifford - Japanese Smaller Companies | 33.65 |
| Baillie Gifford - Japanese | 33.5 |
| Old Mutual - Japanese Equity | 31.97 |
| CF Ruffer - Japanese | 31.76 |
Source: FE Analytics
Looking at the mixed asset sectors, unsurprisingly it was those with greater equity content that fared the best. IMA Flexible Investment led the way with returns of 7.48 per cent, followed by IMA Mixed Investment 40%-85% Shares with 7.25 per cent, IMA Mixed Investment 20%-60% Shares with 3.91 per cent, and Mixed Investment 0%-35% Shares with 1.65 per cent.
In spite of newspaper headlines reporting that bond markets have had "the worst first half of the year since 1994", those in the IMA universe have held up pretty well. According to FE data, the popular IMA Sterling Strategic Bond sector has lost just 0.5 per cent.
Some of the high-profile players in the sector, including Artemis High Income and Invesco Perpetual Monthly Income Plus, have easily outstripped inflation. Our data shows that both have returned more than 4.5 per cent.
Looking at the performance of funds on a relative basis, small caps and income have been the two winning themes. Both the IMA UK Equity Income and IMA Global Equity Income sectors have beaten their growth equivalents, and within those sectors it has been the defensively positioned funds that have fared the best.
Neil Woodford’s Invesco Perpetual Income and High Income funds, and Mark Barnett’s Invesco Perpetual UK Strategic Income fund are all top-five performers in the IMA UK Equity Income sector, with returns ranging from 16.8 to 20 per cent.
Small and mid cap focused funds have also done very well. John McClure's Unicorn UK Income fund has kept up its stellar record, with returns this year of 16.27 per cent. It has also been a good year for PFS Chelverton UK Equity Income, which has registered 17.04 per cent.
In the UK All Companies sector, mid cap favourites such as Franklin UK Mid Cap, Old Mutual UK Mid Cap and Schroder UK Mid 250 have all achieved top-decile returns so far this year. Multi-cap value-focused funds such as Schroder Recovery and Standard Life UK Equity Unconstrained have also done well.
While the sharp market falls felt at the end of May and beginning of June have caused concern across the industry, it is interesting to note that countless fund managers said prior to the correction that the markets had overheated and were due a pull-back.
Interestingly, the majority of FE Trustnet readers agree with them, and remain more optimistic in the longer term.
According to our latest poll, only 12 per cent have decreased their equity exposure during the recent correction, with the vast majority either sitting on their hands, or increasing it. Of the 1,656 people polled, more than four in 10 said that they have used the fall as a buying opportunity.
Mark Dampier (pictured), head of research at Hargreaves Lansdown, thinks the pull-back has given investors an opportunity to put their cash to work.
"I think it’s an excellent opportunity for those who weren’t already in the markets," he said. "It’s important to remember that the markets wanted this fall to happen. There’s so much cash sitting around doing nothing and so a fall like this has given people an excuse to get back in again." "We had two or three extraordinary weeks when the markets went up every day, and people started to get a bit itchy. The semi-bad news [regarding the tapering of QE], which hasn’t changed a great deal, has given investors an opportunity to put some money to work."
"I myself put some money into the markets last week," he added.
Dampier says he has added to his positions in Artemis Strategic Assets, Old Mutual UK Dynamic and the in-house HL Income & Growth fund.
In two articles later today, FE Trustnet will look at the best-performing investment trusts and stocks of 2013.
