Okay, so as we’re writing this we’re hearing that the European Central Bank has agreed to pump more money into Greek banks to prevent a full-blown crisis in the beleaguered state’s financial system.
Given a couple of weeks of bearishness stemmed by the continued uncertainty over Greece’s future, it’s too early to gauge how this reflects the international community’s sentiment towards the flash-point country’s future, but it’s a topic we’ll no doubt return to over the coming week.
But we wrote all of our stories this week before this happened – so below is a selection of the non-Greek stories we’ve enjoyed writing this week. From everyone at FE Trustnet, everyone have a great weekend…
How bargain hunters have doubled their investment trust returns – and more
Head of content Josh Ausden took a look at how investors have been able to benefits from an extra 150 percentage points of performance over the past three years, if they bought an investment trust prior to a significant narrowing of their discount.
Private equity trust 3i Group was the prime example used to illustrate this point, as the trust has seen a 198.73 per cent share price return over the last three years while its net asset value has increased by just 44.74 per cent.
Source: FE Analytics
Other examples used by Ausden include Lindsell Train IT, which has returned an impressive 221.68 per cent from an NAV point of view over the past decade but 322.98 per cent in share price terms.
Woodford Patient Capital Trust has managed just over 3 per cent in NAV terms since it was launched last month but investors in the trust have seen their capital rise by more than 11 per cent however.
Are investors right to pile out of Woolnough’s M&G Optimal Income fund?
FE Alpha Manager Richard Woolnough’s giant M&G Optimal Income fund has shrunk by close to £2bn over the last two and a half months, with a significant chunk of this coming from outflows.
FE Trustnet reporter Alex Paget took a look at why clients have been redeeming from the popular fund, which manages around 70 per cent of the assets in the IA Sterling Strategic Bond sector, and asked if they were being prudent or alarmist in exiting.
Performance of fund versus sector since launch
Source: FE Analytics
Ben Willis, head of research at Whitechurch, said: “We’ve sold out of our holdings in M&G and that’s not because we think Woolnough isn’t an exceptional manager – we think he is, actually. It is because we are concerned about the size of their funds.”
“At the end of the day, who has gone into that fund? Retail investors. Who are always the last to leave a fund? Again, it’s retail investors. If they do start voting with their feet then the outflows could be wholesale.”
Buy, hold or fold: Should you get out of the lagging Troy Trojan fund?
The Troy Trojan find was a surprise entrant to Chelsea's DropZone after underperforming its average peer by 23.77 per cent over the past three years.
Over the past three years, the fund has returned just 6.93 per cent, while the average fund in the IA Flexible Investment sector has made 37.25 per cent and its FTSE All Share benchmark is up 44.83 per cent.
We took a look at the fund to see if this is enough of a reason for investors to sell out of the fund, which is famed for its reputation for protecting capital in difficult markets.
Tilney Bestinvest’s Jason Hollands said: “Trojan, and its investment trust cousin Personal Assets Trust, are first and foremost capital preservation portfolios, not vehicles that seek to compete on relative returns versus the markets or indeed other sector constituents.”
“In a period of soaring equity markets, super-fuelled by the octane of quantitative easing programmes and ultra-low interest rates around the globe, you should not expect a fund like this to have performed as well as funds with a more risky positioning that will invest more heavily in equities. Trojan is the sort of investment you want to be holding in tough times, and especially in a crisis, not if you are ultra-bullish on the markets.”
The “staggering” fund buying trend that’s left Gary Potter scared
F&C’s Gary Potter says the flood of retail money going into commercial property funds is a cause for concern, as investors should remember the devastating losses that hit the asset class at the peak of the financial crisis.
Potter (pictured), who heads up F&C’s multi-manager range with Rob Burdett, said: “Frankly I’m staggered – and I know that’s a strong word – by the euphoria that’s surrounding property once again. I think there are some good opportunities in property but if you look at what happened the last time you had this much cash going into commercial property funds, it wasn’t good. That really scares me,” he said.
“I just wonder why people don’t think more about what happened in 2008 with the large retail-focused property funds. Now you’re getting potential cash drags and ever larger properties being purchased because the funds are so much bigger.”
Inflows into IA Property funds over 2015
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Source: Investment Association
Potter also argues that the flow of money going into property funds suggests investors are ignoring the fundamental reasons for buying the asset class. He said: “What’s property really about? It’s about longstanding, sensible total return supported by yield that can gradually improve over time. What we’ve had is the opposite – euphoria and prices, especially for property trusts, have taken off.”
Why the AIM index has done so badly since launch
The AIM has just turned 20, but although investors are often told to look further down the market-cap spectrum for the highest growth opportunities, it has actually lost money since launch.
In this article, Matthew Jennings, investment director at Fidelity Worldwide Investment, revealed why he believes the index has done so badly over such a long time frame and why investors shouldn’t necessarily discount funds that focus on this area of the market.
He pointed out that Alex Wright, one of the best-performing managers since the financial crisis, has 20 per cent of his Fidelity UK Smaller Companies fund in the AIM.
This has allowed him to pick up bargains such as luxury goods brand Mulberry, which went up 25 times in value between the time he bought it in 2009 and when he sold it two years later.
