Absolute Return
Early 2010 saw a wash of Absolute Return fund launches, with 10 funds kicked off in the first quarter of the year alone. Of these funds, only two – L&G UK Absolute and CF Eclectica Absolute Macro – have achieved top-quartile returns over their nearly three year track records. They have also successfully delivered positive returns year on year.
Since the end of the first quarter of 2010, the £16.1m L&G UK Absolute fund is the third-best performing fund in the sector, having returned 16.5 per cent over the period. The IMA Absolute Return sector returned an average of 4.72 per cent over the period.
The £194.2m CF Eclectica Absolute Macro fund has returned 10.91 per cent over the period, according to FE data.
Performance of funds vs sector since Q1 2010
Source: FE Analytics
The L&G portfolio is more accessible than the Eclectica vehicle, with a minimum investment of £500 and a total expense ratio (TER) of 1.71 per cent. The Eclectica fund has a minimum investment of £5,000 and a TER of 1.88 per cent.
China/Greater China
While three funds took a stab at the intricate economy of China at the end of 2009 and first quarter of 2010, only the Neptune Greater China Income fund has come out in the top quarter over its three year history.
The £11.8m portfolio, headed by Douglas Turnbull, reached its three year anniversary in mid-December.
Since launch, the fund has returned 11.4 per cent, while the sector has returned 0.72 per cent. It also outperformed the MSCI China index, which returned 4.15 per cent over the period.
Performance of fund vs sector and index since launch
Source: FE Analytics
The fund is also the highest yielding fund in the sector, at 4.13 per cent, as well as being the least volatile. Over three years, the fund has an annualised volatility of 13.13 per cent, which is more than 3 percentage points lower than the FTSE All Share.
The portfolio is top-quartile in terms of Alpha, or value above the momentum of the assets in the portfolio, over the three year period as well, at 3.19.
It has a minimum investment of £1,000 and a TER of 2 per cent.
Flexible Investment
Coming up to its three year mark in February, the £39.4m Prudential Adventurous Portfolio Sterling fund has achieved top-quartile returns since launch.
Headed by Matthew Williams since launch, the portfolio has returned 21.96 per cent, while the sector has achieved 15.45 per cent over the period.
The multi-manager fund is primarily composed of European and UK equities, with the high-growth Aberdeen and First State emerging markets and Asia Pacific funds among its top-10 holdings.
Mixed Investment 0-35% Shares
For the more cautious investor, the £98.3m Barclays Income Plus Portfolio could be a good place to look for total return with income.
While the multi-manager fund is only yielding 2.95 per cent, it has achieved top-quartile returns since launch in April 2010, returning 21.2 per cent, doubling the returns of the sector, which delivered 11.43 per cent.
Half the portfolio is exposed to investment grade or government bonds through holdings in various Barclays funds, as well as the Invesco Perpetual Corporate Bond fund, which is the top holding in the portfolio.
Mixed Investment 20-60% Shares
Multi-manager Williams also topsthe charts over three years with the £146.5m Prudential Cautious Growth Portfolio Sterling fund.
Since launch in January 2010, the fund has returned 20.63 per cent, outshining the sector, which returned 14.81 per cent.
However, the portfolio is among the more volatile in the sector since launch, with a bottom-quartile annualised volatility figure of 7.95 per cent.
Global
Rather unusually, it was a tracker that made it onto the 'bright young funds' list in the IMA Global sector. The £311m Vanguard Global Small-Cap Index fund was the only one of six launched roughly three years ago that has achieved top-quartile returns since inception.
Since January 2010, the passive fund has returned 27.93 per cent, while the IMA Global sector returned an average of 12.42 per cent.
The fund successfully tracked the MSCI World Small Cap index, which returned 28.3 per cent over the period, with a tracking error of just 0.27 per cent.
Performance of fund vs sector and index since launch
Source: FE Analytics
For direct investors, Vanguard funds have a minimum investment of £100,00; however, the vehicles are available via platforms for significantly lower investment levels.
Global Emerging Markets
The emerging markets sector has been dominated by First State and Aberdeen, whose investment portfolios have significantly outperformed their peers.
However, with both flagship portfolios in the process of being soft-closed, those looking for exposure to the high growth sector need to look elsewhere.
The Somerset Emerging Markets Dividend Growth, launched at the end of March 2010, has delivered top-quartile returns of 20.69 per cent.
The fund is making a play on increasing demand from the developing market consumer, with 29.6 per cent of the portfolio tipped toward consumer products. Nearly half the portfolio is allocated to the Pacific basin region, followed by roughly 15 per cent in both the Americas and South Africa.
The £127.7m Somerset portfolio, managed by Edward Lam and Edward Robertson, has a minimum investment of £2,000 and a TER of 1.3 per cent.