The likes of MFM Techinvest Special Situations, Liontrust UK Smaller Companies and MI Chelverton UK Equity Growth are the best performing UK equity funds over the year since the general election, according to research by FE Trustnet.
In May 2015 David Cameron’s Conservative party astonished pollsters by winning an outright majority after five years of coalition government alongside the Liberal Democrats, which itself had followed 13 years of a Labour majority government under Tony Blair and subsequently Gordon Brown.
The past 12 months have not only seen the first year of a Conservative government for the best part of two decades, but also the greatest scare for global markets since the financial crisis following fears of a China-induced crash. These are events are not connected.
After an initial substantial rally following Cameron’s win investors have also been concerned by uncertainty surrounding the UK’s position in the European Union, the health of global economy, a sharp fall in the oil price, bloody tensions in Syria, confusion over the timing of US interest rate increases and the US presidential election taking place later in 2016.
According to FE Analytics, the smaller end of the UK equity market has been the best performing over this period with the FTSE Small Cap index up 1.53 per cent over the past year.
Unfortunately for investors in mid-caps, the FTSE 250 index is down 1.25 per cent but even worse for those with large-cap holdings, the FTSE 100 the index is down 7.19 per cent. All these figures include dividends being re-invested.
Performance of indices over 1yr
Source: FE Analytics
Japanese smaller companies funds and specialist gold funds have been the clear winner across the whole 3,500-strong spectrum of the Investment Association universe. MFM Junior Gold and CF Ruffer Gold have been the best performers of any involved in the UK market returning 63.28 and 54.89 per cent respectfully over the past year.
Small and micro-cap funds were the clear winners in the broader UK equity space led by the £8.6m MFM Techinvest Special Situations, which is also a specialist portfolio of technology-focused stocks.
The fund has been managed by Conor McCarthy and Darren Freemantle since launch in 2005. It now sits in the top quartile of the IA UK Smaller Companies sector over one, three and five years with a 96.34 per cent return over the latter period. Top holdings currently include Fulcrum, Boohoo and the recently hard hit Miton Group.
Performance of fund, sector and index over 1yr
Source: FE Analytics
FE Alpha Managers Anthony Cross and Julian Fosh’s £433m Liontrust UK Smaller Companies is the second best performer from the three main Investment Association UK equity sectors.
The pair have managed the portfolio for 18 and eight years respectively, with a process driven by what the managers call ‘economic advantage’. This involves a rigorous assessment of intangible benchmarks including ‘intellectual property’, ’distribution channels’ and ’repeat business’.
Performance of fund, sector and index over 5yrs
Source: FE Analytics
Other top performing small and mid-cap funds in the past year include TB Amati UK Smaller Companies, Marlborough UK Micro Cap Growth, Standard Life Investments UK Smaller Companies, Old Mutual UK Smaller Companies Focus and CF Miton UK Smaller Companies.
The £25m MI Chelverton UK Equity Growth and £40m Premier ConBrio Sanford Deland UK Buffettology also performed well but are multi-cap portfolios and sit in the IA UK All Companies sectors, in which they were the top performers.
All these funds have not only clocked up stronger returns than the broader UK equity market, as measured by the FTSE All Share, but have also been substantially less volatile.
Further analysis by The Share Centre found the UK stock market has been more volatile than any other post-election year since 1987 in the past 12 months
However, market movement during the last 12 months has been the lowest when compared to any other general election in the past 30 years.
This means while compared to other post-election periods, the stock market has been bumpier, it also seen the smallest spread from its high to its low.
Source: The Share Centre
In most cases the movement from peak to trough was around 30 per cent in the year after a general election but at 26 per cent the last year has been lower and substantially lower than the dramatic movements seen in 1987, when the market moved 58 per cent from top to bottom.
Richard Stone, chief executive of The Share Centre, said: “The data shows that 2015/16 has been an exceptional year and it is hardly surprising that investor sentiment and activity has been relatively weak.”
“Investors have had to face into a falling market, trading in a narrow range but with high volatility, in other words high risk. With the market lacking direction but risk high, many investors have chosen to sit on the side lines.”