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What happened to the FE Trustnet team's 2017 fund picks?

21 December 2017

As 2018 nears, the FE Trustnet team follows up on the funds they were backing at the start of the year.

By Rob Langston,

News editor, FE Trustnet

After a challenging 2016 that wrongfooted many fund managers, investors were uncertain of what 2017’s markets would bring their way.

Markets weathered a number of geopolitical shocks this year with seemingly little impact as the ‘most hated bull market ever’ continued to run its course.

A year ago, FE Trustnet journalists revealed their fund picks for 2017: Gary Jackson - First State Global Listed Infrastructure; Jonathan Jones - Schroders Recovery; Rob Langston - Monks Investment Trust; Anthony Luzio - Jupiter India; and Lauren Mason Investec - UK Special Situations.

Below we look at the funds in greater detail and consider their performance over 2017.

Performance of funds in 2017

 

Source: FE Analytics

News editor Rob Langston has emerged as having backed the best performer of 2017 after picking out Monks Investment Trust.

“I’ve chosen the Monks Investment Trust for my fund pick, a fund that focuses on global growth stocks held for around five years on average,” he said at the time.

“Since taking over the management of the trust in 2015, the Baillie Gifford team behind its global alpha strategy have set about repositioning the portfolio to capture more geographically-diversified growth.”

As the above chart shows, the four FE Crown-rated investment trust - which is managed by Charles Plowden alongside deputy managers Malcolm MacColl and Spencer Adair - has enjoyed a strong year delivering a total return of 33.87 per cent. This compares with a gain of 14.16 per cent recorded by the FTSE World benchmark.

Trust chairman JGD Ferguson said performance this year had been supported by improvements in the global economy.

More importantly, he further noted, companies in the portfolio had continued to prosper by identifying growth markets, retaining strong competitive positions, and maintaining flexible managerial approaches.

Investment trusts can outperform their open-ended peers thanks to some of their unique characteristics. But the open-ended version of the fund - Baillie Gifford Global Alpha Growth - also performed strongly delivering a 22.27 per cent total return over the year.


 

In second place is Trustnet Magazine editor Anthony Luzio and the five crown-rated Jupiter India fund, which rose by 21.65 per cent over the year compared with a rise of 26.44 per cent gain for the MSCI India index.

Luzio took a positive view on the fund despite government demonetisation towards the end of 2016, which saw the withdrawal of 500 and 1,000 rupee notes from circulation to tackle corruption and caused a shock for surging Indian market.

The fund has seen some swings in performance because of uncertainty over the implementation of prime minister Narendra Modi’s Goods & Services Tax (GST).

However, FE Alpha Manager Avinesh Vazirani (pictured) remains confident that the tax - levied on various goods and services and replacing a number of state and local taxes - will deliver “massive long-term benefits”. 

The fund manager said while the implementation of the GST has caused uncertainty the negative effects are likely to be temporary. Indeed, the GST reinforces Jupiter’s key economic thesis, said Vazirani, that modernisation and Modi’s reforms will lay the foundation for strong growth over the long term.

In third place is editor Gary Jackson’s fund pick First State Global Listed Infrastructure. The five crown-rated fund managed by FE Alpha Managers Peter Meany and Andrew Greenup has delivered a total return of 9.84 per cent, compared with a rise of 9.91 per cent in the FTSE Global Core Infrastructure 50/50 benchmark index.

Jackson said there were several reasons for liking the £2.6bn fund: as a diversifier away from UK stocks, as a beneficiary of increased infrastructure spending, and to diversify his own portfolio.

The fund is well liked by advisers and features in each of the three FE Adviser Fund Index (FE AFI) portfolios.

Located in the IA Global sector, the specialist fund sits alongside more generalist peers making comparison challenging.

However, analysts at FE Invest note the fund’s solid performance this year as investors have turned to infrastructure and utilities in favour of bond markets due to the stable cashflows and income on offer.


 

Rounding out the FE Trustnet editorial team are reporter Jonathan Jones and former senior reporter Lauren Mason.

Both picked value-oriented strategies, Jones preferring Schroder Recovery and Mason plumping for Investec UK Special Situations.

At the time, Jones said: “While everyone knows it is best to buy low and sell high, doing so is more difficult.

“Indeed, value investing has become increasingly less popular in recent years as the slow growth, low interest rate environment has led to the steady outperformance of growth stocks.

“But with many analysts telling us this trend is soon to end, now appears to be the right time to buy value, which, if nothing else, has mean reversion on its side.”

However, despite outperforming the growth style in 2016, value has underperformed this year.

Performance of indices YTD

 
Source: FE Analytics

Of the two, the Schroder Recovery fund was the better performer returning 6.97 per cent compared with a gain of 10.92 per cent for the FTSE All Share index.

The £1.1bn fund is run by FE Alpha Managers Kevin Murphy and Nick Kirrage and invests in equities of UK companies that have suffered a severe setback in either share price or profitability.

Meanwhile, Mason’s fund pick - Investec UK Special Situations - was up by 4.22 per cent in 2017.

Mason - who was the star fund picker of FE Trustnet in 2016 - said she chose the fund headed by veteran fund manager Alastair Mundy for his experience of managing through both value euphoria and what he has previously described in FE Trustnet articles as ‘value hell’.

“That said, he has still managed to weather periods when his investing style has fallen out of favour reasonably well, having marginally underperformed his sector average over three and five years but significantly outperformed over the last decade,” she noted.

“While the fund is perhaps not best-suited to the more cautious investor, it’s worth bearing in mind that Mundy’s penchant for highly unloved companies has led to attractive income pay-outs.”

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.