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McDermott: The funds I am buying for my ISA before the deadline

Chelsea Financial’s Darius McDermott is feeling bullish on enough on gold and Europe to fill this year’s ISA tax wrapper.

Daniel Lanyon

By Daniel Lanyon, Senior reporter
Friday March 04, 2016

Investors are fast running out of time to make use of their £15,240 allowance for their 2015/16 ISA which ends with the beginning of the new tax year, less than a month away. However, to secure units in a fund or funds there is only two or three weeks to ensure the 1 April deadline is not missed.

Managing director of Chelsea Financial Services Darius McDermott has recently allocated his allowance largely to two well-known funds: the £3bn Jupiter European fund and £760m BlackRock Gold & General fund.

The latter has soared in recent months, up 40 per cent since January, due to a rally in the gold price that has prompted gold mining equities to soar.

Performance of fund and index in 2016

Source: FE Analytics

“I’m buying Jupiter European and BlackRock Gold & General on a monthly basis. I have been a long-term buyer of gold on a monthly basis believing the equities to be undervalued compared to the spot price. Also it's a nice hedge against the worries in markets at the moment,” McDermott said.

Evy Hambro has managed BlackRock Gold & General since April 2009 and was joined by FE Alpha Manager Tom Holl in July last year. 

Since Hambro took over, the fund has lost 28.02 per cent, beating its index by nearly 20 percentage points. Although clearly a substantial loss, this is a high beta fund compared to the gold price with huge upside potential in a rally in the gold price and the opposite when it’s falling, which it has done for five years - Until the recent equity market sell off, of course.

Performance of fund and index under Hambro

Source: FE Analytics


Hambro’s largest holding is Randgold Resources, which is currently just over 10 per cent of the portfolio, with the remaining nine largest holdings making up a total 52 per cent of the fund’s total assets – making it a concentrated portfolio.  

However, as well as being mainly a gold fund the portfolio is also to a lesser extent exposed to silver mining operations which comprise about 10 per cent of the fund.

It has a clean ongoing charges figure (OCF) of 1.17 per cent.

McDermott is fan of Hambro as well as the manager of his other main ISA fund, Alexander Darwall, who manages the Jupiter European fund. He says they are both “high quality” managers.

“Jupiter European I have been buying as I have been a fan of European equities for a few years mostly due to quantitative easing [QE] in Europe,” he said. 

European stocks took a huge boost 14 months ago due to the announcement of QE by European Central Bank president Mario Draghi.

That has fallen away somewhat in recent months but many are anticipating further stimulus when Draghi updates the markets next week on the success of the ECB’s efforts so far.

At £3.6bn the Jupiter European fund is one of the largest in the IA Europe ex UK sector. FE Alpha Manager Darwall has run the portfolio since 2001, over which time he has returned 282.1 per cent – more than three times the return of the average fund in the sector and the FTSE World Europe ex UK index.

Performance of fund, sector and index under Darwall

 

Source: FE Analytics


The fund is also top decile for total return over one, three, five and 10-year periods. It struggled somewhat in 2013 but thanks to a strong performance last year it is still the fourth best of 91 funds in the sector over three years

Performance of fund, sector and index over 3yrs

   

Source: FE Analytics

Apart from in 2005, 2006 and 2013 it has beaten the sector and its FTSE World Europe ex UK benchmark in each of the last 10 calendar years.

It has been top decile for its maximum drawdown, downside risk and risk-adjusted returns over the past 10 years in part thanks to focus on high quality defensive names such as pharmaceutical giant Novo Nordisk – the fund’s largest holding.

It has a clean OCF of 1.03 per cent.

McDermott, while mainly opting for these two funds, has also topped up his holding in the Aberdeen Latin American Equity fund.

“It is totally out of favour but is one for the long term,” he said

Latin America, like the gold price, has been hit very hard due to the rout in commodities over recent years as well as a host of scandals hitting Brazil, which is the largest market for investors to the region.

The Aberdeen Latin American Equity fund hit an all-time low since its launch in 2011 in January 2016 and has bounced since then more than 10 per cent.

It has a clean OCF of 1.28 per cent.

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Data provided by FE. Care has been taken to ensure that the information is correct, but FE neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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