Moneywise Fund Awards 2011
It hasn't been a great year for investors. Across the globe, economic concerns, natural disasters and banking crises have led to rollercoaster stockmarket returns.
But there are funds that have weathered the storm.
The Moneywise Fund Awards seek to highlight those funds that have outshone their competitors and consistently delivered top performances whatever the economic weather.
UK ALL COMPANIES
WINNER: L&G UK ALPHA
HIGHLY COMMENDED: Standard Life UK Equity Unconstrained
COMMENDED: Liontrust Special Situations, Rensburgh UK Mid Cap Growth, Royal London UK Mid-Cap Growth
Uncertainty over the future for the UK economy has seen investors abandon the UK All Companies sector in their droves - it was the worst selling sector of 2010, according to the Investment Management Association. "Developed markets such as the UK are often overlooked in the rush for emerging market growth," explains Danny Cox, head of advice at Hargreaves Lansdown.
"But there are many UK companies that derive a significant proportion of their earnings from faster-growing overseas economies," he says, suggesting the sector can still provide plenty of opportunities.
This year's winner is Legal & General's UK Alpha fund. Impressive growth - with returns of 77.83% over five years compared to a sector average of just 1.29% - sent the fund to the number one spot.
"This is a high-quality fund with an investment mandate that allows the manager, Richard Penny, the freedom to invest in any UK-listed company in which he sees value," says Gavin Haynes, the managing director of financial adviser Whitechurch Securities.
The runner-up in this category is Standard Life's UK Equity Unconstrained fund, which has performed well since stockmarkets bottomed out in March 2009.
The manager Ed Leggett "has exploited overly negative sentiment in the recovery phase," says Haynes.
UK SMALLER COMPANIES
WINNER: CLOSE SPECIAL SITUATIONS
HIGHLY COMMENDED: Marlborough UK Micro Cap
COMMENDED: Cazenove UK Smaller Companies, Investec UK Smaller Companies, Standard Life UK Smaller Companies
This was one of the best-performing sectors last year and there are "many quality fund managers and exciting companies in this area of the market," says Cox. It is more volatile than the UK All Companies sector, as for a company to qualify it has to be in the bottom 10% of the market in terms of size.
But "for investors seeking exciting growth prospects, investing in smaller companies can provide good opportunities," says Haynes. The companies in this sector are likely to be ones you've never heard of, but they could be the Google of tomorrow, making it an exciting sector to invest in.
Our winner in this sector is Close Special Situations. "Returns have been exceptional from this fund, with particularly strong returns achieved from companies involved in mining," says Haynes.
He adds: "The fund is an aggressively managed smaller companies fund and not for widows and orphans. The fund manager takes large positions in favoured companies and you need to accept potential for high volatility."
The runner-up in this sector is the Marlborough UK Micro Cap fund, which benefits from having a team of managers with "a wealth of experience," says Haynes. By focusing on very small firms with significant growth potential, it has achieved impressive returns.
CORPORATE BOND SECTOR
WINNER: M&G STRATEGIC CORPORATE BOND
HIGHLY COMMENDED: M&G Corporate Bond,
COMMENDED: Halifax Corporate Bond, Fidelity MoneyBuilder Income, Henderson Long Dated Credit
This sector has been very popular in recent years as investors seek out decent income in a low-interest market, it was the biggest-selling sector in September.
Funds in this sector invest in corporate bonds - loans provided to companies in return for regular fixed-interest payments, plus the return of the investors' capital when the bond matures. Their nature means that corporate bond funds tend to pay a decent yield but not offer huge amounts of capital growth - but some of them buck this trend.
For example, this year's winner, M&G's Strategic Corporate Bond, fund pays a yield of 3.9% and has delivered 46.01% growth over the past five years. "This is a great return for a low-risk fund," says Geoff Penrice, a chartered financial planner at Honister Partners.
It is a defensively-managed fund that focuses on investing in high-quality investment grade corporate bonds. Managed by the very experienced Richard Woolnough, the fund has secured the top spot in the Corporate Bond category for three years in a row.
Woolnough also manages our runner-up, the M&G Corporate Bond fund. "Woolnough's defensive positioning during the difficult periods for bond markets has been impeccable, while he has also done well to capture strong returns in the corporate bond rally that commenced in 2009," says Haynes.
WINNER: UNICORN UK INCOME
HIGHLY COMMENDED: Troy Trojan Income
COMMENDED: CF Walker Crips Equity Income, IP High Income, Aviva Investors UK Equity Income
This year's winner, the Unicorn UK Income fund, has been managed since launch in 2004 by John McClure. Holdings such as investment manager Brewin Dolphin have helped the fund achieve impressive growth of 81.66% over the past three years - double the next best performer in the sector.
Our runner-up is the Troy Trojan Income fund, which currently yields 4.4% and has returned 35% over the past five years. The fund is "an excellent defensive choice for investors," says Haynes.
WINNER: CF RUFFER EUROPEAN
HIGHLY COMMENDED: CF Miton Special Situations Portfolio
COMMENDED: CF Miton Strategic Portfolio, Newton Balanced, Henderson Enhanced Balanced
Funds in the balanced managed sector have a broad investment remit - they can invest in a range of assets as long as no more than 85% of the fund is invested in equities.
This is attractive to investors as they can access a diverse range of investments within a single fund.
Our winner, the Ruffer European Fund, has performed fantastically with returns of 72% over five years. Fund manager Timothy Youngman has "added value by not being afraid to hold safe haven investments, including gilts and gold, during periods of market turmoil," says Justin Modray, owner of financial advice website candidmoney.com.
"This fund gives stable returns and avoids the rollercoaster ride of some of the more volatile funds," adds Penrice.
The runner-up, CF Miton Special Situations, has taken the number two spot for the second year running. Haynes says it's an "excellent cautiously-managed fund". He adds: "The manager, Martin Gray, is known for his bearish stance, which in the current difficult investment climate has worked well for investors."
EUROPE (EXCLUDING UK)
WINNER: BLACKROCK EUROPEAN DYNAMIC
HIGHLY COMMENDED: Jupiter European
COMMENDED: BlackRock Continental European, Threadneedle European Select, Ignis Argonaut European Alpha
With Greece teetering on the brink of bankruptcy and Italy and Spain facing debt crises, it's hardly surprising that the Europe excluding UK sector was the worst selling in the last quarter. But, in fact, there are companies here that can offer investors real value, and many funds in this sector have delivered excellent returns.
For example, our winner, BlackRock European Dynamic, has returned almost 45% in the past three years, despite the problems plaguing the continent. The key to its success is manager Alister Hibbert's "focus on European firms with a high level of exposure to growth in emerging markets," says Cox.
Our runner-up, the Jupiter European fund, has also produced exceptional returns with growth of 34.35% over three years. Haynes comments: "The manager, Alex Darwall, is given the freedom to position the portfolio with significant differences to country and sector benchmarks. He focuses on large, well-managed firms and the fund is a good core European holding."
WINNER: NEPTUNE US OPPORTUNITIES
HIGHLY COMMENDED: AXA Framlington American Growth
COMMENDED: Threadneedle American, Schroder US Mid Cap, Henderson US Growth
The US government appears to be managing to stimulate growth, but its budget deficit is now trillions of dollars and the trade deficit is widening. All of this has made investors wary of the North America sector, but there are decent investments out there - after all some of the world's most innovative and profitable companies call America home.
Our winner is the Neptune US Opportunities fund. "The US stockmarket is notoriously difficult for fund managers to outpace, so manager Felix Wintle deserves credit for beating the S&P 500 over the six years he has run this fund," says Modray.
"But his aggressive approach has meant a bumpy ride, with exceptionally good years followed by less impressive periods, although he appears to be taking a more defensive stance in recent times."
The runner-up is the equally well-respected AXA Framlington American Growth fund. The fund manager Steve Kelly "has a strong track record of investing in high-quality growth businesses in the US stockmarket," says Haynes. The fund is a good choice for anyone wanting exposure to large US equities, including Apple and Google.
ASIA PACIFIC (EXCLUDING JAPAN)
WINNER: ABERDEEN GLOBAL ASIAN SMALL COMPANIES
HIGHLY COMMENDED: Newton Asian Income
COMMENDED: First State Asia Pacific Sustainability, First State Asia Pacific, First State Asia Pacific Leaders
This year hasn't been great for Asia Pacific investments. China's soaring growth has stalled, with investments in the country managing only lacklustre returns and India's stockmarket has experienced sharp falls.
But that doesn't mean the area is a no-go for investors. "The fundamental reasons for investing in many of these markets remain," says Cox. They have just been hit in the short term by wider global concerns. "Any falls in these markets could provide a good long-term buying opportunity."
The Aberdeen Global Asian Smaller Companies fund has taken the prize in this sector with returns of 243% over seven years. The fund is managed by a "well-resourced and stable investment team, all of whom are based in the Asia Pacific region," says Haynes. "This fund is well worth considering for any investor wanting exposure to emerging businesses in Asia."
Our runner-up is the Newton Asian Income fund, which gives exposure to dividend-paying companies in Asia. The fund has "proven defensive in falling markets," says Haynes, while also producing "pleasing total returns" over the long term.
WINNER: ABERDEEN EMERGING MARKETS
HIGHLY COMMENDED: First State Global Emerging Markets Leaders
COMMENDED: Aberdeen Global Emerging Market Equities, First State Global Emerging Markets, Baillie Gifford Emerging Markets
Investors looking for long-term gains continue to put their money into the emerging markets sector. For anyone "looking to exploit the global shift of economic power away from the Western developed economies, this sector provides exposure to diversified emerging market funds," says Haynes.
The Aberdeen Emerging Markets fund has won the Moneywise Fund Awards for two years running, which is hardly surprising given its "good, consistent performance," says Penrice. It's an excellent choice for anyone seeking emerging market exposure as it is run by "one of the most experienced teams in the sector".
The First State Global Emerging Markets Leaders fund is the runner-up in this category. It's a "consistent performer" thanks to its management by First State's "very strong and experienced Asia and Emerging Markets desk," says Penrice.
WINNER: FIRST STATE GLOBAL RESOURCES
HIGHLY COMMENDED: IP Global Smaller Companies
COMMENDED: Fidelity Global Consumer Industries, Rathbone Global Opportunities, Ecclesiastical Amity International
With the European economy rarely off the front pages this year, it is hardly surprising that the Global sector has been popular. One of the best ways to protect your wealth is to diversify - and global funds are a simple way to do this.
This year's winner is the First State Global Resources fund, which has consistently outperformed its rivals - it has achieved 69.22% capital growth over the past five years. It has "exploited the bull market in commodity prices over the past decade to great effect," says Haynes.
But its heavy focus on commodities means "investors need to be prepared to accept a high level of volatility".
This sector's runner-up is Invesco Perpetual's Global Smaller Companies fund. The management team are "playing a very smart game," says Nick McBreen, an IFA for Worldwide Financial Planning.
The familiar name given to securities issued by the British government and issued to raise money to bridge the gap between what the government spends and what it earns in tax revenue. Back in 1997, the entire stock of outstanding gilts was £275bn; by October 2010 it had surpassed £1,000bn. Gilts are issued throughout the year by the Debt Management Office and are essentially investment bonds backed by HM Treasury & Customs and considered a very safe investment because the British government has never defaulted on its debts and this security is reflected in the UK’s AAA-rating for its debt. Gilts work in a similar way to bonds and are another variant on fixed-income securities.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
A bull market describes a market where the prevailing trend is upward moving or “bullish”. This is a prolonged period in which investment prices rise faster than their historical average. Bull markets are characterised by optimism, investor confidence and expectations that strong results will continue. Bull markets can happen as a result of an economic recovery, an economic boom, or investor irrationality. It is the opposite of a bear market.
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.
Corporate bonds are one of the main ways companies can raise money (the other is by issuing shares) by borrowing from the markets at a fixed rate of interest (the reason why they are also known as “fixed-interest securities”), which is called the “coupon”, paid twice yearly. But the nominal value of the bond – usually £100 – can fluctuate depending on the fortunes of the company and also the economy. However it will repay the original amount on maturity.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
A person (or business) unable to pay the debts it owes creditors can either volunteer or be forced into bankruptcy – a legal proceeding where an insolvent person can be relieved of their financial obligations – but loses control over their bank accounts. Bankruptcy is not a soft option. Although it may wipe the financial slate clean, it is extremely harmful to a person’s credit rating (it will stay on your credit record for six years) and will adversely affect your future dealings with financial institutions. Bankruptcy costs £600 paid upfront.