Standard Life Investments UK Smaller Companies, Baillie Gifford American and Fundsmith Equity are among the best-performing adviser-backed funds of the year so far, according to research by FE Trustnet.
The first half of 2019 has proved to be a tale of two very different quarters.
After a difficult end to 2018, markets rallied during the first quarter of the year as the Federal Reserve suspended its path to policy normalisation and opened up to the possibility of rate cuts later in the year.
However, stock markets were rocked during the second quarter by a renewal of last year’s trade dispute between the US and China and – for UK strategies – by renewed concerns of a ‘hard’ Brexit.
Despite the May setback, however, markets have performed strongly this year, as the below chart shows.
Performance of indices YTD
Source: FE Analytics
Given the changeable market backdrop, FE Trustnet decided to find out which of the funds recommended by the FE AFI panel of advisers have performed best in 2019.
First up is the Standard Life Investments UK Smaller Companies fund. A constituent of the AFI Balanced index, the £1.6bn fund has returned 24.64 per cent compared – almost double the 12.92 per cent gain for the IA UK Smaller Companies sector.
Standard Life Investments UK Smaller Companies is headed up by FE Alpha Manager and veteran small-cap specialist Harry Nimmo.
Nimmo has overseen the fund since January 1997, during which time it has made a total return of 1,604.28 per cent compared with 645.45 per cent for the average peer.
The manager built the firm’s proprietary quantitative screening tool ‘Matrix’, which highlights stocks with the potential to outperform.
While expecting further volatility due to the Brexit delay, the manager noted recently it has geographic diversification of returns within the Standard Life Investments UK Smaller Companies portfolio to insulate it.
“We will continue to focus on high-quality growth companies that are in charge of their own destinies,” he said. “This approach has stood us in good stead throughout the fund’s lifespan. We expect it will continue to do so as we move through 2019 and beyond.”
The fund has an ongoing charges figure (OCF) of 0.99 per cent.
Not far behind Nimmo’s fund is Baillie Gifford American, which has made a 24.29 per cent total return during the period under review, well in excess of the 16.32 per cent rise for the S&P 500 index (in sterling terms) and 16.6 per cent gain for the average IA North America peer.
The £2.3bn fund is team-managed by Gary Robinson, Helen Xiong, Tom Slater and Kirsty Gibson and like other Baillie Gifford strategies has a focus on growth. It has an OCF of 0.52 per cent.
FE Alpha Manager Terry Smith’s Fundsmith Equity rounds out the top-three with a total return of 22.21 per cent since the start of the year.
The £18bn, five FE Crown-rated fund invests in a concentrated portfolio of high quality global stocks typically with little leverage, competitive advantages, strong cashflows, that are resistant to disruption and are attractively-valued.
Since launch in November 2010, the fund has returned 351.74 per cent significantly outperforming the MSCI World’s 163.31 per cent return. The fund has an OCF of 1.05 per cent.
Source: FE Analytics
Two other Baillie Gifford funds feature in the top 10 adviser-backed funds in 2019: Baillie Gifford UK Equity Alpha and Baillie Gifford Global Discovery.
The £373.9m four FE Crown-rated Baillie Gifford UK Equity Alpha fund is overseen by Gerard Callahan and invests in a concentrated portfolio of UK growth stocks. It has risen by 21.79 per cent, so far this year and has an OCF of 0.57 per cent.
The £790.4m Baillie Gifford Global Discovery fund is also four FE Crown-rated and is run by FE Alpha Manager Douglas Brodie. The fund invests in global stocks with significant growth prospects and has a bias towards small-cap names in industries with the potential for structural change and innovation.
Since the start of the year it has returned 20.49 per cent. It has an OCF of 0.78 per cent.
Another top-performing adviser-backed fund since the start of the year is the five FE Crown Lindsell Train Global Equity, managed by veteran Michael Lindsell, business partner Nick Train and James Bullock.
Like Fundsmith Equity, the £8bn fund invests in a concentrated portfolio of stocks with a focus on quality. Lindsell Train Global has returned 21.14 per cent since the start of the year. It has an OCF of 0.74 per cent.
Other top performers from the FE AFI sectors include Rory Powe’s Man GLG Continental European Growth fund (up 21.07 per cent), Janus Henderson Global Technology (20.98 per cent), Cormac Weldon’s Artemis US Select (20.67 per cent), and the Standard Life Investments Property Income Trust (20.33 per cent).
At the other end of the performance spectrum were a number of absolute return funds and one well-known UK equity manager currently making all the headlines.
Source: FE Analytics
The worst performer since the start of the year is the $76.6m Odey Odyssey fund, a multi-asset strategy overseen by Tim Bond, which has lost 15.21 per cent this year and has significant short equity positions. It has an OCF of 1.14 per cent.
Neil Woodford’s LF Woodford Equity Income fund also sits near the bottom of the performance table having made a 10.5 per cent loss so far this year.
Concerns over performance and exposure to unquoted stocks has seen significant outflows from the strategy, which the manager has now gated to protect investors from forced selling. It has an OCF of 0.75 per cent.
Other loss-making funds since the start of the year include several absolute return strategies, led by Merian Global Equity Absolute Return. The $8.9bn fund – managed by Amadeo Alentorn, Ian Heslop and Mike Servent – is down by 5.78 per cent. It has an OCF of 0.86 per cent.
It was joined at the bottom by James Clunie’s £1.5bn Jupiter Absolute Return fund (down 4.7 per cent), the four FE Crown-rated Premier Defensive Growth (down 1.58 per cent) and Paul Casson’s Artemis Pan European Absolute Return fund (down 1.17 per cent).