Market conditions this year were considerably different from those at the end of 2018 when the Trustnet team made its forecasts, nevertheless there were some strong returns to be had from our 2019 fund picks.
Below, we take a look at the funds in greater detail and consider their performance over 2019.
Performance of funds in 2019
Source: FE Analytics
Despite the inauspicious start to the year, all the Trustnet team’s fund picks made a positive return in 2019, as the above chart shows.
However, news editor Rob Langston’s choice – Polar Capital Global Insurance – emerged as the best performer after making a total return of 22.87 per cent (to 15 December).
The £1.5bn fund – overseen by FE fundinfo Alpha Manager Nick Martin – marginally outperformed its MSCI World/Insurance benchmark, which was up by 21.59 per cent over the same period.
Performance of fund vs benchmark in 2019
Source: FE Analytics
After a challenging 2018, Langston opted for a strategy that should perform in all market conditions given a continuous demand for insurance.
Nevertheless, it is not a strategy for the faint-hearted as it is a concentrated fund in a highly regulated sector with the team often investing in small- and mid-sized companies.
“I’ve been pleased with the performance, but would note that – like the previous year – I again made the big calls wrong,” said Langston. “Thankfully, I was more bearish on UK equities than some of my colleagues and avoided placing too much faith in a Brexit-inspired rebound.”
The next best-performing fund from the Trustnet team’s picks was editor Gary Jackson’s Baillie Gifford Emerging Markets Growth fund.
The £1.1bn, five FE fundinfo Crown-rated fund is overseen by Richard Sneller and Mike Gush and follows the growth style of investing the asset management house is famed for.
Last year, Baillie Gifford Emerging Markets Growth rose by 18.62 per cent outperforming both the IA Global Emerging Markets peer group (up 12.15 per cent) and the MSCI Emerging Markets benchmark (9.96 per cent).
Performance of fund vs sector & benchmark in 2019
Source: FE Analytics
Emerging markets had a much stronger year after a dismal 2018, which was dogged by fears over a full-blown US-China trade war and policy tightening by the Federal Reserve. However, signs that a deal will be struck between the US and China and the reversal of policy direction by the Fed have helped buoy emerging markets this year.
It was the second year in a row that Jackson had picked the fund after the fund had a poor 2018, recording a 10.29 per cent loss. Jackson continues to own Baillie Gifford Emerging Markets Growth fund in his own portfolio and considers it a longer-term holding.
Although, as Jackson noted last year, the fund was something of a counterpart to the Liontrust Emerging Markets (née Neptune Emerging Markets) which he had recently invested his newborn son’s portfolio.
That fund – managed by Ewan Thompson – has not had as good a year as the Baillie Gifford strategy, however, and is up by just 9.38 per cent in 2019.
Jackson said: “I do feel a little bit bad that my emerging market fund has made more money than the one I put in my now 14-month-old’s portfolio. But he’s been a good sport and hasn’t mentioned it! Plus he has another 54 years of compounding to look forward to – a luxury I wish I had.”
Propping up the Trustnet leaderboard again this year is Trustnet Magazine editor Anthony Luzio, whose pick Schroder Recovery delivered a strong double-digit return this year, despite the style of the fund being largely out of favour in recent years.
Schroder Recovery targets companies that have suffered a severe setback in either share price or profitability in the expectation of a turnaround in fortunes.
This time last year, Luzio said that the strategy would be best-placed to play a UK rebound should there be a resolution over Brexit.
Yet, progress over Brexit has stalled following the failure of Theresa May’s withdrawal agreement and a second post-referendum general election.
Nevertheless, the £1.1bn four Crown-rated fund – managed by veteran value investors Kevin Murphy and Nick Kirrage – made a 10.22 per cent total return.
However, this was still well below the 19.5 per cent gain made by the average IA UK All Companies peer and a 16.19 per cent total return for the FTSE All Share benchmark.
Performance of fund vs sector & benchmark in 2019
Source: FE Analytics
The value style favoured by the fund has been out of favour for much of the past decade as growth strategies have dominated. There has been a short-term reversal in the trend more recently, however, it remains to be seen whether value can outperform growth for a longer run.
“I chose this fund on the expectation that the final Brexit deal would be signed off by the end of March, giving the UK the clarity it needed to help correct its underperformance of the past few years,” said Luzio.
“While the fund’s return of 10.22 per cent isn’t a complete disaster, half of these gains came on Friday. This shows that while my hypothesis wasn’t completely flawed, you should never base your investment choices around an event with a binary set of outcomes – or trust politicians.”