How well did the Share Centre’s 2016 fund tips do? And three picks for 2017…
This time last year, Andy Parsons, head of investments at online platform The Share Centre, picked Legg Mason Japan Equity, Schroder European Alpha Income and Liontrust UK Smaller Companies fund. All three achieved positive returns in 2016, but it’s worth looking at each of them individually.
Legg Mason Japan Equity
The fund achieved growth of around 20% year-to-date. This sounds like a good return but it is below its sector benchmark of 23% and the fund ranks 48th out of 64 within its peer group.
“With an economy that continually struggles to gain traction, both in terms of growth and inflation, the past year has been a rollercoaster of a ride given the movements in the currency. However, it is also worth noting that some short-term volatility should be expected given the fund’s bias towards small to mid-cap stocks,” said Parsons.
Schroder European Alpha Income
This fund has fared better relative to its peer group, ranking 8th out of 107 and achieving 21% growth YTD, compared to a benchmark of 13%.
“The fund adopts a cyclical approach to investing, focusing on stocks that perform well through phases of recovery, expansion, slowdown and recession. I believe this will ensure the fund is well poised to continue its strong performance into 2017,” said Parsons.
Liontrust UK Smaller Companies
This fund has returned 11% YTD, against a sector benchmark of 6%, ranking 6th out of 46 in its peer group.
“The fund has a strong bias towards AIM listed companies, with a heavy sectorial bias in technology, industrials and financials. We continue to recommend this fund to investors seeking a strong management team with a proven track record, and who are looking for a slightly punchier and riskier UK alternative to a more traditional UK blue chip holding,” said Parsons.
Three ideas for 2017
Despite a tumultuous year for markets, Parson’s fund tips for 2016 didn’t fare badly. But next year is also set to be rocky as investors await the first wave of initiatives from Donald Trump and the ramifications of the Brexit vote.
Parsons, therefore, is tipping three funds capable of weathering and possibly even benefiting from market turbulence.
CF Miton US Opportunities
US markets rallied on the strength of Donald Trump’s post-election rhetoric, while the Federal Reserve’s subsequent announcement of an interest rate rise, followed by indications of potentially a further three hikes in 2017, points to a strengthening US economy.
“This fund gives investors an opportunity to benefit from the US recovery by investing primarily in North American equities which are seen to have a competitive advantage. The managers believe that companies with regular and growing cash flow are more likely to deliver attractive returns than immature businesses looking to develop new products or relying on one-off events. This should put them in a relatively safe position under the Trump presidency,” said Parsons.
Polar Capital Global Insurance
This is the only European fund dedicated to investing in the global insurance industry.
“In a time of market volatility many investors will be reassured by the stability this industry potentially offers, although they should appreciate the increased level of risk associated with focusing on just the one sector. Those seeking an opportunity to invest in the global insurance market should look to this fund for medium to long term rewards,” said Parsons.
Man GLG Continental European Growth
This is a fund for investors looking for a core portfolio of European equities, who want to focus away from the UK.
“Fund manager Rory Powe looks for strong European growth companies that fall in to two camps, which he refers to as ‘established leaders’ and ‘emerging winners’,” said Parsons.
“He takes a bottom up approach to selecting companies for his fund, which means he is looking for businesses that have recurring revenues underpinned by pricing power, high gross margins, robust cash flow, a strong balance sheet and cash returns.”