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The funds on track for their best year since 2015

19 November 2018

Research by FE Trustnet shows that only a handful of funds are thriving in 2018 as market conditions continue to hamper returns.

By Gary Jackson,

Editor, FE Trustnet

Only seven funds in the Investment Association universe appear to be on track to make more money in 2018 than they have in each of the previous three years, research by FE Trustnet finds.

This year has seen investors hit with two market corrections of note, with the most recent taking place in October. Global stock markets declined last month on the back of a host of concerns, including heightened valuations, tighter US monetary policy, rising bond yields and the trade spat between the US and China.

As markets struggled in 2018, so did many funds. With this in mind, FE Trustnet wanted to see if any funds were on track to have a better year than they did in 2015, 2016 and 2017.

Performance of index by calendar year

 

Source: FE Analytics

These were quite different years for investors. Using the MSCI AC World as a reference, we can see that 2015 was a challenging one with returns of just 3.29 per cent, 2016 saw the bull market return in force with gains of 28.66 per cent and 2017 ended up being decent with returns of 13.24 per cent; however, 2018 to date has seen the index rise only 2.20 per cent.

Our research highlighted just how difficult 2018 has been. We looked at 2,733 Investment Association funds that had track records back to at least the start of 2017 and for 2,290 of them, returns over the year to date were their lowest for the period examined.

That means 83.4 per cent of all funds are having their weakest year since 2015. In fact, only seven funds (after excluding money market products) are making more money in 2018 than they did in 2015, 2016 and 2017.


The fund coming out on top when the market is considered like this is LF Odey Total Return, which has made 10.31 per cent this year.

This compares favourably with the previous three years as it lost money in each of them. In 2017, the fund was down 3.55 per cent, it shed 13.28 per cent in 2016 and lost 1.72 per cent in 2015.

Recent years have been challenging for Odey Asset Management, which was founded by Crispin Odey, as many of its portfolios – including LF Odey Total Return – have been betting against rising stocks. Odey has been a critic of central banks’ ultra-loose stance and warned about a looming market crash.

In LF Odey Total Return’s interim results to June 2018 (so ahead of October’s falls), the investment management team said returns had been driven by its long book but said its short positions would help if the market sold off. “The fact is after 10 years of extreme monetary policy, asset prices (including property) have been elevated well above levels we consider to be sustainable,” it added.

Performance of fund over 2018

 

Source: FE Analytics

LF Odey Absolute Return is also going through its strongest year since 2015, with a total return of 8.9 per cent.

Global equity funds that focus on healthcare are also going through a strong year. FE Analytics shows that the MSCI World Healthcare index is one of the better performing global sectors this year, with a 13.95 per cent total return compared with a gain of just 3.69 per cent in the wider MSCI World.

Among the seven funds on track for a relative strong year compared with the recent past are three that specialise in healthcare stocks: Pictet Health (up 12.72 per cent in 2018), Schroder Global Healthcare (up 13.49 per cent) and Fidelity Global Health Care (up 15.02 per cent).

In a recent update, the managers of the Pictet Health fund said: “While several recent macro-economic and political developments can be pointed to to explain the more cautious positioning toward equities (rising interest rates, risk of an escalating trade war between China and the US, Brexit and Italy), October also saw the start of the Q3 reporting season.

“This allowed investors to focus on the companies’ fundamentals, which overall for our health strategy have not materially changed and remain robust. Results and outlooks from pharma ranged from in-line to better-than-expected. With a medium- to long-term view there are several fundamental reasons why we think the health theme is set to perform.”


In addition to the two Odey and three healthcare funds, the others that seem to be on track to have their strongest year in three years are the long/short TM Sanditon UK Select fund and Janus Henderson Credit Alpha. Both reside in the IA Targeted Absolute Return sector.

The above research only looks at the funds that have a track record going back to the start of 2015. If we loosen the parameters to those that have a history that includes 2017 at least, then another 12 funds are heading towards their best year in the recent past.

VT Cape Wrath Focus, which is a concentrated portfolio and has a value tilt, made 5.98 per cent in 2017 – its first full calendar year of track record – but is up 12.72 per cent over the year to date.

TM Sanditon European Select, which is another long/short equity fund in the IA Targeted Absolute Return sector, lost 1.77 per cent last year but has returned 3.39 per cent so far in 2018.

Other funds making it onto the shortlist include NB Global Dynamic Asset Allocator, T. Rowe Price Dynamic Global Bond, Lazard US Equity Concentrated, L&G Global Real Estate Dividend Index, Man GLG European Alpha Alternative and Threadneedle Global Opportunities Bond.

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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.