Just under one-third of all of bond, equity and multi-asset funds that finished in the bottom 10 per cent of their sector last year have made a top-decile return so far in 2019.
Markets struggled in 2018 as several macroeconomic worries made their impact felt, including simmering trade tensions between the US and China, a tightening Federal Reserve and ongoing Brexit uncertainty, as well as several other issues.
As such, the developed markets-focused MSCI World index made a 3.04 per cent loss (in sterling terms), while the MSCI Emerging Markets index dropped 9.27 per cent and and the FTSE All Share fell 9.47 per cent.
However, there has been some improvement in markets this year as the US-China trade dispute seems to have abated, the Fed paused its rate-hiking programme and the prospect of a hard Brexit seems to be receding.
As a result, markets have largely rallied in 2019 with the MSCI World up by 12.73 per cent, the emerging markets rising 10.92 per cent and the FTSE All Share making 12.77 per cent (to 17 April).
Bearing this in mind, there have been several strong performances by funds that found themselves in the bottom decile last year.
Of 245 funds from the mainstream bond, equity and mixed asset sectors – excluding those found in the IA’s Specialist, Unclassified and Yet To Be Assigned sectors – that were among last year’s worst performers, 77 have turned in a top-decile return so far this year.
Source: FE Analytics
The chart above shows all the funds from equity sectors that were ranked in the bottom decile ranked in order by their 2019 returns.
In top place is Michael Lai’s GAM Star China Equity fund, which has made a 28.5 per cent total return in the 2019 so far. The $431.3m Chinese equity fund – like many in the sector – struggled last year, recording a 23.9 per cent loss but it is not the only strategy to have had such a turnaround in performance.
With the MSCI China index up by 19.36 per cent so far this year, it’s perhaps little surprise to see Chinese funds dominating the table. Charlie Awdry’s £1.4bn Janus Henderson China Opportunities is the largest strategy, returning 23.01 per cent in 2019 compared with a loss of 17.16 per cent.
Outside of China, the Standard Life UK Opportunities fund has undergone a strong turnaround in performance. Following on from a loss of 17.13 per cent last year, Abby Glennie’s £122.3m fund has made a return of 22.14 per cent.
After the poor performance of the domestic market last year a number of UK equity strategies have managed to generate strong returns in 2019 as Brexit negotiations have tended to preclude a ’no deal’ scenario, boosting UK stocks.
Other notable strategies include the £747.2m Royal London UK Opportunities fund overseen by Craig Yeaman and the £719.1m Artemis UK Select fund managed by Ed Legget and Ambrose Faulks.
With fewer fixed income sectors there was some more obvious trends at work with a great number of high yield strategies rising from the bottom decile of 2018 to top-decile performance in 2019.
Source: FE Analytics
The fund at the top of the table is Hermes Global High Yield Credit, the €172.6m strategy managed by Fraser Lundie, which has risen by 8.83 per cent so far this year after a 4.99 per cent loss in 2018.
There were also a number of global emerging market debt funds found to have turned around performance after a difficult year for the asset class as the Fed tightened and the dollar strengthened.
Among other more notable funds boasting much improved performance this year are the GAM Star Credit Opportunities GBP and Fidelity Global High Yield funds.
The £956.1m, five FE Crown-rated GAM Star Credit Opportunities GBP fund is overseen by FE Alpha Manager Anthony Smouha, Gregoire Mivelaz and Patrick Smouha (who joined in December). The unconstrained fund has made a 6.19 per cent return so far in 2019.
The £195.2m Fidelity Global High Yield fund – also five FE Crown-rated – has performed a bit better, returning 7.64 per cent.
Given the strong sell-off in in equity markets at the end of last year and the strong start to 2019, it’s little surprise to learn that mixed asset funds with the ability to take the biggest exposure to the asset class are found dominating the mixed-asset table.
Source: FE Analytics
The best performer from the mixed-asset sectors so far this year is the little-known £4m Purisima EAFE Total Return fund, which has made a 15.24 per cent return.
Other more established mixed-asset offerings that have turned around performance this year include the £858.7m M&G Episode Growth fund, which is managed by Jenny Rodgers, Eric Lonergan and Craig Moran and is the second best performer from the bottom decile of 2018 with a 14.71 per cent gain.
FE Alpha Manager Julian Lewis’ £604.2m TM Cavendish International fund also makes the list with a 12.92 per cent gain this year helping to erase the memory of a 11.75 per cent loss last year.