Trustnet Direct, the retail investment platform from FE, has recently published a list of the best and worst performing UK unit trusts and OEICs in the first 11 months of 2015. There are more than 4,000 of these funds to choose from and the divergent returns shows what a significant difference your investment decisions can make to your portfolio.
Two of the top five funds invest in the Japanese stock market, which has benefited from a massive programme of Quantitative Easing. In both cases the managers added significant value as the main Nikkei 225 index only made a total return of 15% over the period. They did this via their stock selection decisions and the ability to hedge the currency.
Another top performer was MFM Techinvest Special Situations, a UK small cap fund that was up 33% over the 11-month period. It has an unusual and concentrated portfolio with the 10 largest holdings accounting for 34% of the overall weighting and has just £7.1m in assets under management.
The other two most successful funds are also both highly unusual. Natixis H2O MultiReturns is an absolute return fund that invests in bonds, equities and currencies with the aim of outperforming GBP LIBOR by 4% per annum over rolling 3-year timeframes. It has made its money by shorting US bonds to benefit from higher interest rates, while also going long the dollar for the same reason.
Premier ConBrio Sanford Deland UK Buffettology is a UK fund with a concentrated portfolio where the top 10 holdings account for 53% of the assets. The managers look for businesses with predictable and consistent earnings, enduring franchises with pricing power, strong free cash flow, strong balance sheets and a high return on capital employed. It has just £21.2m in assets under management.
The five funds at the other end of the spectrum have all been badly affected by the slump in commodity prices caused by the slowdown in China and strong dollar. A couple of them invest in Brazil, a country that relies to a large extent on oil and other raw materials and has been embroiled in a number of high profile scandals. Another holds small oil producers, while the other two provide exposure to mining companies.
Contrarian investors may want to take a look at these sorts of funds as they will be the main beneficiaries when commodity prices start to recover, although they will need to be careful about how they do it as there is likely to be further downside to come.
The two top performing Japanese funds are probably the best placed to repeat their success next year, although it will be interesting to see whether the managers of Natixis H2O MultiReturns can identify the big bets that will allow them to deliver another huge return. It would be an amazing achievement if they could.
The five best performing funds
Legg Mason IF Japan Equity 40.56%
MFM Techinvest Special Situations 33.27%
Lindsell Train Japanese Equity 28.50%
Natixis H2O MultiReturns 25.48%
Premier ConBrio Sanford Deland UK Buffettology 25.46%
Source: Trustnet Direct
The five worst performing funds
MFM Junior Oils Trust -41.91%
HSBC GIF Brazil Equity -39.60%
BlackRock GF World Mining -37.45%
JPM Brazil Equity -36.75%
Old Mutual JPM Natural Resources -32.08%
Source: Trustnet Direct