Certain exchange-traded-funds (ETFs), Indian, and European emerging markets equity funds are powering ahead of the global equity index year-to-date, FE Analytics data has revealed.
Out of the 311 funds in the Investment Association’s Specialist sector with a long-enough track record, roughly 30% of funds (92) delivered returns higher than the MSCI All Companies World Index (MSCI ACWI) over the period.
So far in 2021, the MSCI ACWI has returned 13.8% despite a volatile ride during the first quarter of the year.
Performance of MSCI ACWI year-to-date
Source: FE Analytics
Within the IA Specialist sector, there were 16 funds that managed to beat this return by more than 10%.
There were four Indian-focused equity funds, three emerging markets Europe funds, and two Frontier Markets funds that featured amongst the 16.
The table below shows all the funds with a year-to-date return that beat the MSCI ACWI by more than 10%.
Source: FE Analytics
The highest returner in the table was the £22m Alquity Indian Subcontinent fund, which is up 33% year-to-date. Managed by Mike Sell, the fund invests in Indian companies benefiting from long-term domestic growth drivers coming out of the region.
It has a concentrated approach - holding just 30 stocks in the portfolio, with large positions in Infosys (8.9%), HDFC (6.8%) and ICICI Bank (6%).
Year-to-date, Infosys, which sells a range of software services, is up 37%, whilst financial services firms HDFC and ICICI Bank are up 9% and 29% respectively.
The manager of the fund said that the latest high-frequency indicators show that India’s economy has been bouncing back towards levels last seen before the country’s second Covid-19 wave after cases in the country have declined dramatically.
The other three Indian funds that featured in the table were the £138m Nomura India Equity fund, the £50m Liontrust India fund and the £1.7bn GS India Equity Portfolio fund.
Managed by Goldman Sachs Asset Management’s Hiren Dasani, the GS India Equity Portfolio invests in a slightly less concentrated basket of Indian stocks – with 96 holdings in the fund.
Like the Alquity Indian Subcontinent fund, its largest position is in Infosys (8.2%), and it also holds ICICI Bank (6.4%) in its top-10.
Foreign investors have piled into the country as earnings have improved, following the recovery from the country’s devasting Covid second wave that occurred earlier in the summer.
Aside from the presence of many Indian funds, there were five passive exchange-traded-funds (ETFs) that featured in the table.
One example was BlackRock’s £769m iShares Listed Private Equity UCTITS ETF, which returned 32.6% over the period – making it the second highest performer in the table.
This ETF tracks the S&P Listed Private Equity Index, which is made up of global publicly listed companies that invest in private equity. These include Blackstone Group, Partners Group and Brookfield Asset Management.
Private equity has been boosted by a bumper year in global merger & acquisition activity which has reached all-time high.
The £1bn Lyxor EURO STOXX Banks UCITS ETF was another index tracker that featured, returning 25.5% year-to-date. It invests in the EURO STOXX Banks index, which is up 29% year-to-date in local currency terms, compared to just 17% from the broader EURO STOXX 50 Index.
The EURO STOXX Banks index is made up of the financial services companies listed across the Eurozone. These include names such as French-listed BNP Paribas, Spanish-listed BCO Santander and Dutch-listed ING Group.
These stocks have been beneficiaries of the ‘re-opening’ trade that has pushed investors into banks and financials, which tend to perform well in an inflationary environment.
Elsewhere in the table, there were a number of emerging Europe and Frontier markets funds that featured.
One notable strategy was the FE fundinfo four-crown rated, £917m Schroder ISF Emerging Europe fund, run by Rollo Roscow and Mohsin Memon.
This fund invests in Emerging European stocks which have performed relatively well this year, with the MSCI Emerging Markets Europe Index up 18.8% in local currency terms.
The performance of this region depends largely on Russia, which makes up more than two thirds of the index. Additionally, much of the index is made up of cyclicals such as energy companies and miners – which have performed well over the past year on the back of rising commodity prices.
The Schroder managers are optimistic that this performance can continue given the fact that the region is set to exit the coronavirus pandemic, and so economic activity will likely continue to normalise on a sustained basis.
Another notable fund was the FE fundinfo four-crown rated £108m Fidelity Emerging Europe Middle East and Africa fund, run by FE fundinfo Alpha manager Nick Price and Greg Konstantinidis.
This differs from the prior fund in that its mandate also allows it to invest in the Middle East and Africa. It has 34% invested in Sub-Saharan Africa, compared to 24.7% from the MSCI Emerging Markets Europe, Middle East and Africa Index.
However, it is still heavily invested in Russian companies – where 9 out of 10 of its biggest holdings are invested.