Looking back on the Trustnet team’s fund picks from the start of the year, some might consider it an abject failure – and it would be hard to argue so far.
As I wrote on Thursday, it has been an inauspicious start for our selections, with a portfolio of our picks making a loss at a time when global stocks are up around 8%.
I will not go over our selections again in detail here, but it did throw out an interesting thought. At the start of the year, I wrote that the world would enter into recession in the first half of the year and that the big call of 2023 would be when the surely inevitable recession would end and a rebound begin.
Back then it seemed like a sensible suggestion, with interest rates on the rise, inflation rampant and geopolitical tensions around the world.
Yet this has not been the case. Clearly my crystal ball needs to go to the repair shop – although I’m not sure even Jay Blades and his team can fix it.
In January I chose Fidelity Asia Opportunities run by FE fundinfo Alpha Manager Anthony Srom, as I thought emerging markets were better prepared for the economic picture than developed peers, but wanted to avoid overvalued South American companies – which have continued to soar this year.
But it has been the US and in particular tech stocks that have blossomed on the back of a rise in artificial intelligence (AI), while Asia and the emerging markets have been hampered by sluggish growth in China.
Looking for the positives, the fund is in the top quartile of the IA Asia Pacific Excluding Japan sector over the year so far, up now 1.4% at the time of writing, compared with a 1.8% fall for the average peer and a 1.4% decline in the MSCI AC Asia Pacific ex Japan index.
I own the fund myself, having bought in last year. In a case of ‘sod’s law’, 2022 was the first year the fund underperformed its peers, losing 11.5%, almost double the sector’s 6.9% drop.
Still, the portfolio has beaten peers in every other calendar year since 2015 (it launched in September 2014) so while my timing couldn’t have been worse, I believe my fund selection is actually pretty strong.
Analysts at FE Investment agree. “Srom has generated an excellent record in both rising and falling markets, which is even more impressive as he has typically avoided holding the large-index constituents that most managers have crowded into,” they said.
So should I be happy that I picked a top performer, even if it isn’t likely to win me any awards in the short term? Talking to Downing fund manager Simon Evan-Cook earlier this year, he has learned that it is better to get the fund pick right than punt on macroeconomics.
For years the former Premier Miton manager argued that the US was overvalued and held a longstanding underweight position to the region, only to find that the S&P 500 was the strongest performing index year after year.
In his new venture at Downing he has changed this way of thinking, freely admitting that his skills do not lie in making country-specific calls.
Where his strengths are is in fund selection. Despite lacking exposure to the best market of the past decade, his previous funds were strong performers, proving that the best funds in weaker markets can still be profitable.
So perhaps my fund pick will not shoot the lights out this year based on the macroeconomic calls that I had hoped for, but I am confident that it remains a good selection for my ISA, which I am rebuilding having used a lot of it last year to ready ourselves for the birth of our first child and hoping not to touch now for some time.