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The story so far…US on top

Posted by: Brian Dennehy
Tags: q3, review
Membership level: Free
 
As the end of the 3rd quarter is upon us, we review the best and worst funds for the year to date. Did you profit from the sectors and funds with potential through 2018? Or are you still dithering about duds? (To see last week’s sector review, have a look here)
 
The best (table 1)
 
The top individual funds are dominated by US and US-focussed technology funds (in line with the trend identified last week at a sector level). Baillie Gifford’s funds take the top two spots, and they have a strong preference for the headline grabbing tech names like the FAANGs and Tesla.
 
The funds which aren’t in the North American sectors nevertheless have big weightings to the US. AXA’s Global Technology fund has 89% in the US and counts Alphabet, Apple, Facebook and Amazon amongst its top 10 holdings. Together, those stocks make up 25% of the fund.
 
Blue Whale Growth and Baillie Gifford Global Discovery both have big US weightings, in excess of 60%. SLI Global Smaller Companies has a more “global” look, with only 41% in the US.
 
The worst (table 3)
 
At the bottom table, an Absolute Return fund makes an appearance yet again. City Financial Absolute Equity is the worst fund year-to-date, down nearly 25%. The Absolute Return sector is notoriously mixed up – buyer beware (more here).
 
More predictably, the rest of the bottom funds are either emerging market or commodity funds with a focus on gold and precious metals. Most Indian funds have been in the dog-house for a while now, Jupiter in particular. As a country that imports 80% of its oil it has been hurt by the strong dollar and rising price of oil, with the bill for importing oil set to rise by around 25% this year.
 
The rest (table 2)
 
We also show the best funds from the other popular sectors.
 
Schroder Income tops the Equity Income sector, a good return for a Value focussed fund – buying what’s undervalued by the market.  SDL UK Buffettology tops the UK All Companies sectors year-to-date. It’s not quite a Value fund but does actively avoid over-valued investments.
 
Liontrust UK Smaller Companies is the best of the UK Smaller Companies sector, with an impressive 13.7% return year-to-date.  This is one of our long-term favourites as it gives investors access to young, growing UK technology companies.
 
There have been good returns for some funds in Europe with both the main sector and the smaller companies sector best funds showing strong returns. 
 
Smaller companies are often the “canary in the coalmine” so while good performance by these sectors is positive keep an eye out for signs of weakness that could pre-empt a downturn.
 
It’s not a surprise to see Asia, emerging markets and China struggling. The best China fund is only up 0.22%. Newton Asian Income is the best fund in the Asia-Pacific ex-Japan sector. In a tough period, it’s good to see one of our Income picks doing relatively well. There are great opportunities for income growth in the Asian region, which we’ve covered more here
 
For long term investors, the poor performance of Asian and Chinese markets can be an opportunity to drip in on weakness – we will return to that one.
 
Japan and Japanese Smaller Companies have seen good returns, with JPM Japan and Baillie Gifford Japanese Smaller Companies up 9.86% and 14.08% respectively.
 
The Specialist sector is intentionally mixed up, with its greatest focus on funds with a very tight focus which don’t easily fit into other sectors. It’s always interesting to see what’s topping it. Health and Biotech funds take the top two places, with AXA Framlington Health taking the top spot (up 14.45%). We wrote more on biotech earlier in the year – have a look here for the detail.
 
These reviews are interesting but they are backward looking, so don’t get too side-tracked. Focus on your process for selecting funds if you want to achieve your potential.
 
ACTION FOR INVESTORS
  • Focus on what matters (your process for selecting funds with the greatest potential, and you’re your stop-loss strategy) and ignore the noise.
  • There are always opportunities somewhere.
  • In higher risk areas, investors can use periods of weakness to drip into funds.  
FURTHER READING
 
Table 1: Best Funds
Fund
Sector
Year to date
6 months
Baillie Gifford American
North America
38.16
21.26
Baillie Gifford Global Discovery
Global
29.38
19.26
Artemis US Smaller Companies
North American Smaller Companies
28.16
26.44
JPM US Smaller Companies
North American Smaller Companies
23.88
18.49
AXA Framlington American Growth
North America
23.45
18.86
AXA Framlington Global Technology
Technology & Telecommunications
23.11
12.43
UBS US Growth
North America
21.54
16.78
Blue Whale Growth
Global
20.21
14.72
Quilter Investors US Equity Growth
North America
19.97
15.2
SLI Global Smaller Companies
Global
19.94
13.44
 
Table 2: Best funds from other sectors
Fund
Sector
Year to date
6 months
CFP SDL UK Buffettology TR in GB
UK All
11.22
11.79
Schroder Income
UK Equity Income
5.56
5.86
Liontrust UK Smaller Companies
UK Smaller
13.73
12.68
Jupiter European
Europe ex-UK
14.77
15.36
Aberdeen European Smaller Companies Equity
European Smaller Companies
17.04
16.94
Newton Asian Income
Asia Pacific ex-Japan
0.85
4.77
JPM Japan
Japan
9.86
6.32
Baillie Gifford Japanese Smaller Cos.
Japanese Smaller Companies
14.08
5.66
FP Henderson Rowe FTSE RAFI Ems
Global Emerging Markets
-1.81
-3.99
Invesco Perpetual Hong Kong & China
China
0.22
-0.37
AXA Framlington Health
Specialist
14.45
18.41
 
Table 3: Worst Funds
Fund
Sector
Year to date
6 months
City Financial Absolute Equity
Targeted Absolute Return
-24.81
-27.61
Quilter Investors Precious Metals Equity
Specialist
-22.14
-8.94
BlackRock Gold & General
Specialist
-22.08
-9.04
Jupiter India
Specialist
-20.98
-7.4
Jupiter Global Emerging Markets
Global Emerging Markets
-19.11
-17.34
Investec Global Gold
Specialist
-17.09
-8.8
Omnis Emerging Markets Equity
Global Emerging Markets
-17.09
-13.96
LF Ruffer Gold
Specialist
-16.47
-13.03
Newton Global Emerging Markets
Global Emerging Markets
-14.68
-9.68
MI Somerset EM Small Cap
Global Emerging Markets
-14.36
-11.44
 
Data: 1/1/18-19/9/18
Topic: Market commentary


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