We review the collectives which did best over the past year
Thursday 19 Dec 2019 Author: Tom Sieber

With just a few trading days left to go, 2019 has been good for the markets. As we write the MSCI World index is up more than 20% since the start of January.

Despite this positive backdrop there has still been considerable market volatility, making life difficult for stock pickers including fund managers.

The funds industry has also been hit by various star fund managers disappointing investors, as well as concerns about liquidity.

Readers may therefore be eager to discover which managers rose above the market issues and delivered strong returns for investors. We now look at the best performers from 2019.


THE OUTRIGHT WINNERS IN 2019

Bestriding the list of best performers like a colossus was Allianz China A-Shares (BKFW2B5). The Anthony Wong-managed fund racked up a 44.8% gain according to FE Fundinfo data.

Adam Gent, Allianz Global Investors’ head of retail for Northern Europe, comments: ‘The Allianz GI China A share strategy has delivered against its investment objective and produced considerable amounts of alpha (excess return) by taking a fundamentally driven, high active share, risk-aware approach via our portfolio management team based in Hong Kong.

‘Given the large divergences in performance that occur in specific sectors it’s a market where a sensible active management approach can deliver handsomely for clients. We have seen increasing amounts of demand from UK clients who are looking to gain equity exposure in one of the world’s largest economies via the domestic market.’

Hot on its heels in terms of 2019 returns was a pair of portfolios plugged into two of today’s most compelling investment themes, namely Wellington FinTech and the capital growth-focused Smith & Williamson Artificial Intelligence (BYPF2Z6).

Managed by Bruce Glazer, Wellington FinTech invests in companies that leverage technology to enhance or disrupt traditional financial services. The likes of Global Payments, Fleetcor Technologies, Paypal, Equifax and Mastercard are leading portfolio positions.

Smith & Williamson Artificial Intelligence has a concentrated portfolio of 39 names. It takes big positions in major US tech names including Google parent Alphabet, which is developing its capabilities in AI and machine learning, chipmaker Nvidia and online grocer-turned-tech platform Ocado (OCDO).

Elsewhere in the top 10 best performing funds, LF Ruffer Gold (B8510Q9) enjoyed a fruitful 2019 as the yellow metal had its time to shine amid trade and political uncertainties and the return of market volatility. The mining industry investor generated a gain of 33.7% during the period under review.


TOP 10 BEST PERFORMING INVESTMENT TRUSTS IN 2019

Some of the top performing investment trusts this year reflect wider market trends. Russia has been one of the top performing equity markets in 2019 so it is little surprise to see JP Morgan Russian Securities (JRS) perform strongly.

A rally in gold also provided Golden Prospect Precious Metals (GPM) with a boost.

Others did well thanks to shrewd stock picking. Notably BlackRock Throgmorton’s (THRG) portfolio of small and mid-caps and well positioned short positions underpinned a strong showing.

Its top holding, promotional products firm 4imprint (FOUR), was a strong contributor to performance as it moved up to the FTSE 250. An apparent shift back towards value investing seems to have helped The Mercantile Investment Trust (MRC).


BEST PERFORMING UK ALL COMPANIES FUNDS

UK equity funds with a mid-cap bias seem to have hit a sweet spot this year, with investors lured by the room to grow from mid-sized companies but reassured by their bigger size than small caps. Franklin UK Mid Cap (B7BXT54) has been the best performer in the UK All Companies funds sector this year.

Fund manager Paul Spencer invests in FTSE 250 companies which he thinks are well-run and have strong growth potential. He has high conviction with only 36 companies in the portfolio, making it a high-risk approach, but the 33.6% return suggests it’s also been a high reward approach this year.

Other funds to have done well in this category include MI Chelverton UK Equity Growth (BP855B7) and Slater Growth (B7T0G90), returning 30.7% and 28.6% respectively this year. Both are full of FTSE 250 and AIM stocks which the managers feel are undervalued and have significant potential for a re-rating.


BEST PERFORMING UK SMALLER COMPANIES FUNDS

The best performing UK small cap fund in 2019 was ASI UK Smaller Companies (B7FBH94) which has been run by industry veteran Harry Nimmo for more than 20 years.

His strategy is to buy high quality growth companies and keep the winners. This means there are some fairly big companies in the portfolio such as media stocks Global Data (DATA:AIM) and magazines firm Future (FUTR) which are really mid-caps. They’ve both been strong contributors to performance in 2019.

This is true for some of the other top performing smaller company collectives, with Invesco UK Smaller Companies (BJ04KT3) also holding Future along with fellow FTSE 250 constituent and infrastructure play Hill & Smith (HILS). Manager Jonathan Brown has a focus on cash generative businesses which can fund their own growth rather than ‘blue-sky’ companies.


BEST PERFORMING GLOBAL FUNDS

The list of best performing funds in the Global category is dominated by those seeking to tap into specific themes, not least sustainability.

The ethical and socially responsible end of the investment universe has mushroomed in recent years as investors embrace the wider ethos and, crucially, have begun to recognise this does not mean poorer performance.

The outright top performer in this sector is Kames Global Sustainable Equity (BYZJ377). Steered by Craig Bonthron and Neil Goddin, the aim is to invest in innovative growth companies which have a positive impact on the world.

Many of the names in the portfolio will be unfamiliar to investors, with the notable exception of US electric vehicle manufacturer Tesla.

Pictet Global Environmental Opportunities (B4YWL06) is another ESG-focused fund which has fared well in 2019, while other thematic funds like Polar Capital Automation & Artificial Intelligence (BF0GL54) and GS Global Millennials Equity Portfolio (B99B998) have done well.


BEST PERFORMING NORTH AMERICAN FUNDS

With just 23 of the 106 North American-focused funds beating the S&P 500’s 25%-odd performance in 2019, it shows just how difficult it is for active funds to outperform their benchmark.

Of those that did, investors will find a mixture of styles, including sustainability, flexibility and those with a mid-cap focus.

With technology stocks still largely leading performance through 2019 it is no surprise that funds sprinkled with names such as Microsoft, Alphabet and Facebook led the way.

Top performer MFS Meridian US Concentrated Fund (B08N6C4) sticks to a focused 30 to 40 stock portfolio but eschews higher-rated stocks like Amazon, Adobe and Salesforce in favour of lower-rated Microsoft, Texas Instruments and Visa, among others. Successful stock selection in healthcare, consumer cyclicals, financial services and industrials led the fund to the top ranking in its category.


BEST PERFORMING STERLING STRATEGIC BOND FUNDS

Bond funds positioned at the longer dated end of the maturity spectrum or those taking more risk had the wind at their backs in 2019, helped by the Federal Reserve’s policy change to lower rates.

Tideway GBP Hybrid Capital Bond (BZ6VKP6) topped the Investment Association’s strategic bond fund league table, having delivered 14.7% for the year.

Another top performer has been the Quilter Investors Diversified Bond (BD9MP57) fund, up 14.3% as it also benefited from its longer duration exposure, with around 45% of its portfolio invested in bonds that mature in over seven years.

Nomura Global Dynamic Bond Fund (BTL1GV7) is the third best performing fund in the sector, up 14%. Manager Dickie Hodges has a mandate to ‘go-anywhere’ and combines ‘top-down’ and ‘bottom-up’ analysis. Nearly a third of the fund is exposed to maturities over 20 years.

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