Investment review – half year report

Adrian Lowcock, investment director at Architas, gives his half-year report on the best and worst performing funds and sectors and considers the outlook for the rest of 2017.

Investment review – half year report

What a difference a year can make. In stark contrast to 2016, the first six months of the year have seen investors regain confidence and, along with it, their appetite for risk.

Emerging markets, including China, have led the way as the recovery in the asset class which began in 2016 regained momentum in 2017. European equities, particularly the more domestically-focused smaller companies, also rallied as political risk on the Continent subsided and the economic data showed that the European economy was improving.

The technology sector continued to post good returns as investors have been focusing on the ability for tech companies to disrupt established market leaders and rapidly acquire large numbers of users and market share.  At some point investors will need to focus on the fundamentals of each business as not all technology companies offer the same risk and return.

Emerging markets and tech dominate the list of best performing funds, but the top spot is for UK Smaller Companies. The Old Mutual UK Smaller Companies Focus fund returned more than double the IA UK Smaller Companies sector average, which was the sixth best performing sector overall. Manager Nick Williamson runs a diverse portfolio and is ably supported by a strong UK team at Old Mutual.  Its performance is a reminder that stock picking and active management can really add value.

 

Best Performing sectors

IA Sector % Total Return
China/Greater China TR in GB 19.9
IA European Smaller Companies TR in GB 18.6
IA Technology & Telecommunications TR in GB 18.3
IA Asia Pacific Excluding Japan TR in GB 16.6
IA Asia Pacific Including Japan TR in GB 15.4

Source: FE Trustnet, 31st December 2016 to 23rd June 2017

Best Performing Funds

Fund % Performance
Old Mutual UK Smaller Companies Focus TR in GB 32.2
Baillie Gifford Greater China in GB 29.1
NB China Equity in GB 28.6
Aubrey Global Conviction in GB 28.0
T. Rowe Price Global Technology Equity in GB 27.9
Polar Capital Global Technology in GB 27.1
GS India Equity Portfolio TR in GB 27.1
Morgan Stanley US Growth in GB** 27.0
Baillie Gifford Pacific TR in GB 26.7
JPM Asia in GB 26.1

Source: FE Trustnet, 31st December 2016 to 23rd June 2017

 

The bottom of the performance tables in the first half of 2017 is packed full of energy-related funds. The sector rebounded strongly following the sell-off in 2016 but has lagged behind the wider market as the oil price found a ceiling and more recently began to fall again as investors became concerned over excess supply.

The Absolute Return sector continues to languish; many leading funds struggled to navigate the macro-economic and political environment in 2016. However, single digit returns are in keeping with many of the funds’ objectives in the sector. The sector remains hard to analyse as it comprises funds with very different objectives and risk characteristics. The US smaller companies rally petered out as it has become increasingly clear Donald Trump will struggle to deliver his tax and spending reforms this year and any final agreement is likely to be less than initially expected.

The concentration of poor performing energy funds at the bottom of the performance tables – they take eight places out of the top ten – should act as a reminder to investors that individual sector funds can be very volatile and such funds can move from the top of the performance tables to the bottom very quickly. A warning to investors in technology funds doing well this year perhaps?

Worst Performing Sectors

IA Sector % Total Return
Targeted Absolute Return TR in GB 2.4
UK Gilts TR in GB 2.3
IA North American Smaller Companies TR in GB 2.1
IA Money Market TR in GB 0.1
IA Short Term Money Market TR in GB 0.0

Source: FE Trustnet, 31st December 2016 to 23rd June 2017

Worst performing funds

Fund % Total Return
HSBC GIF Russia Equity in GB -14.4

GS North America Energy & Energy Infrastructure

Equity Portfolio in GB

-16.6
Artemis Global Energy in GB -16.9
BlackRock GF World Energy in GB -18.2
CF Canlife Global Resource in GB -19.2
Guinness Global Energy in GB -19.3
Investec Global Energy in GB -20.9
VT Craigshannoch Multi Strategy in GB -22.7
Schroder ISF Global Energy in GB -24.2
LO Global Energy in GB -26.4

Source: FE Trustnet, 31st December 2016 to 23rd June 2017

Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. 

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