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Brexit funds review, 2 years on – surprisingly good

Posted by: Brian Dennehy
Membership level: Free

 

The Telegraph got in touch this week to get our ideas on UK shares that are cheap.  In the run up to the second anniversary of the Brexit vote you may be wondering the same thing.  But when we approach investing, we’re not so much looking at what might be cheap (something is always cheap) but rather what is motoring, despite expectations and gloom-ridden frontpage headlines. 

Which fund sectors are motoring?

Looking at sectors that have performed well since the Brexit vote there are plenty of examples that run counter to the common stories pushed by the mainstream media (table 1).  China is the best performing sector (+80%).  We were told that China would collapse under the weight of their debt but for the moment they seem to be coping rather well.

Technology isn’t such a surprise, though concerns over valuations have abounded for more than two years.  Japanese Smaller Companies? They have been perennially unloved.  It’s difficult to get the press to consider Japan in spite of the fact that it’s under-researched and is one of the few developed markets that still offers value (+65%).

The UK was supposed to flounder post-Brexit but UK smaller companies have been buoyant (+56%).  And Europe?  While there has been a wave of populism this hasn’t skuppered the Continent.  European Smaller Companies are up 54%.   In the US, Donald Trump’s presidency hasn’t signaled the end of the US stock market rise.  US Smaller Companies are also up 53%, which is a clear vote of confidence in their domestic economy.

That performance isn’t just a result of sterling weakness.  That only accounts for 1 or 2% of the total returns over the period since the 24th June 2016 (the day after the vote).

How would you have seen through the gloom-ridden headlines to identify these opportunities?  What most investors need is a simple process – like Dynamic Fund Ratings – that will do the work for them.

Star funds shining through the gloom

The top 10 performing funds from the main UK sectors (UK All, UK Equity Income, UK Smaller Companies) are unsurprisingly dominated by smaller company funds (7/10).  The three remaining funds are two with a preference for smaller companies and one that focuses on mid cap investments (Table 2).

Tech is big winner in the Global Top 10  (Table 3), with 3 funds.  The Chinese, Global and North American funds also have a strong tech focus, featuring big tech companies from the US (Facebook, Amazon, Apple, Netflix & Google) along with Alibaba, Baidu and Tencent from Asia.

For instance, the latter three Chinese companies make up 23% of the Baillie Gifford Greater China fund.  The beauty of a process like Dynamic Fund Ratings is that it will take you into sectors with momentum in the shorter term, making it highly probably that you’ll outperform in the longer term.  The Dynamic Global Portfolio is a great example, see new analysis here.

The world certainly has bigger fish to fry than to fret over the UK’s little local difficulty.  Clearly there are opportunities in the UK and globally, in spite of the gloom in main headlines. 

Anyone who has been sitting on their hands waiting for stuff to be cheap has missed a great party.

ACTION FOR INVESTORS

  • Don’t let gloomy headlines get you down…
  • …there are always opportunities.
  • And a simple, robust process is crucial to maximising your growth potential.

FURTHER READING

 

Table 1: Main UT & OEIC sectors (24/06/2016 to 13/06/2018)

Sector
Performance
China/Greater China
80.41
Technology & Telecommunications
74.21
Japanese Smaller Companies
65.21
UK Smaller Companies
56.20
European Smaller Companies
53.99
North American Smaller Companies
53.46
Asia Pacific Excluding Japan
51.75
Japan
48.17
Global Emerging Markets
45.68
North America
43.75
Europe Excluding UK
40.81
Global
38.60
UK All Companies
37.55
Global Equity Income
31.84
UK Equity Income
30.25
Specialist
21.18
Sterling High Yield
12.34
Property
10.93
UK Index Linked Gilts
10.41
Global Emerging Markets Bond
8.62
Sterling Corporate Bond
7.32
Sterling Strategic Bond
6.98
Global Bonds
5.61
Targeted Absolute Return
5.34
UK Gilts
2.01

Table 2: UK Funds (24/06/2016 to 13/06/2018)

Name
Sector
Performance
TM Cavendish AIM
 UK Smaller Companies
                        100.6
Jupiter UK Smaller Companies
 UK Smaller Companies
                          99.9
TB Amati UK Smaller Companies
 UK Smaller Companies
                          82.9
MI Chelverton UK Equity Growth
 UK All Companies
                          77.8
Marlborough Nano Cap Growth
 UK Smaller Companies
                          73.3
Unicorn UK Growth
 UK All Companies
                          73.3
Marlborough UK Micro Cap Growth
 UK Smaller Companies
                          72.4
Old Mutual UK Smaller Companies
 UK Smaller Companies
                          70.1
BlackRock UK Smaller Companies
 UK Smaller Companies
                          67.8
Old Mutual Equity
 UK All Companies
                          67.7
 
Table 3: Global funds (24/06/2016 to 13/06/2018)
 
Name
Sector
Fund Size(m)
Performance 24/06/2016 to 13/06/2018
Baillie Gifford Greater China
 China/Greater China
                        141.7
                          99.3
Baillie Gifford American
 North America
                    1,582.1
                          98.6
AXA Framlington Global Tech
 Tech & Telecoms
                        534.3
                          94.4
JPM US Smaller Companies
 North Am Small Cos
                        177.2
                          93.9
Baillie Gifford Global Discovery
 Global
                        541.5
                          88.7
Janus Henderson Global Tech
 Tech & Telecoms
                        894.4
                          87.4
Janus Henderson China Opps
 China/Greater China
                    1,373.5
                          86.6
Threadneedle China Opps
 China/Greater China
                        125.8
                          85.1
L&G Global Tech Index Trust
 Tech & Telecoms
                        253.3
                          83.7
Fidelity China Consumer
 China/Greater China
                        105.0
                          82.0
Topic: Market commentary


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