Baillie Gifford Greater China, Neptune Global Alpha and Royal London Sustainable Managed Growth Trust are some of the smaller funds that have made first-decile gains in their respective sectors over 2017 so far, according to data from FE Analytics.
In a recent article, we looked at the £1bn-plus funds that were sitting in their peer group’s top decile over the year to date. Household names such as Fundsmith Equity, CF Lindsell Train UK Equity and Jupiter European were included on that list.
However, it’s not only the industry’s biggest funds that have had a strong 2017. When we looked for funds with assets between £50m and £300m, we found that 99 are in their peer group’s top decile for the year to date.
Sitting at the top of the list is the £91.9m Baillie Gifford Greater China fund, which is the best performer this year in the IA China/Greater China sector after making a 58.93 per cent total return.
Performance of fund vs sector and index over 2017
Source: FE Analytics
The five FE Crown-rated fund, which is managed by Mike Gush and Sophie Earnshaw, is a consistently strong performer. It has beaten its average peer in seven of the past eight full calendar years and is either the sector’s highest or second-highest returner over one-, three- and five-year periods.
Like all of Baillie Gifford’s funds, it is managed with the long-term view in mind. The managers build the portfolio with a five-year perspective, seeking “significant upside” in each stock and having a preference for growth.
While this approach has worked over the long run, Chinese equities have also been buoyed by a boost in investor sentiment towards to the country (notwithstanding a sell-off in recent days). FE Analytics shows the IA China/Greater China sector has posted the highest average return over the year to date, rising by 40.65 per cent.
In fact, Asian equities as a whole have had a strong 2017 as investors paid more attention to emerging markets and were more reluctant to put more money into already-pricey areas such as the US.
FE Analytics shows the IA Asia Pacific ex Japan sector is the third highest returning peer group this year with an average total return of 26.81 per cent. After Baillie Gifford Greater China, the next small top-decile funds all reside in the IA Asia Pacific ex Japan sector.
Source: FE Analytics
Of course, many of the funds on the above table – which only shows the 25 highest returners out of the full list of 99 – will be unfamiliar to many investors given their smaller size and relative lack of attention. However, there are a number in the list that are rated highly by investment analysts.
TB Amati UK Smaller Companies, which is in 16th place, is top quartile in the IA UK Smaller Companies sector over one, three and five years, a strong track record that has helped it win a place on the FE Invest Approved List.
The FE Invest team cited the fund’s size as a merit: “The fund is, in 2017, smaller than many of the most successful funds in the sector. This means the managers are able to buy the smallest stocks in their universe that have greater potential for outperformance and become unavailable to funds as they grow.
“It also means they are able to buy and sell meaningful positions quicker and without losing money on the trades, unlike larger funds, which are forced to become major shareholders in companies if their investment is to be meaningful.”
Neptune Global Alpha, which is rated ‘A’ by Square Mile Investment Consulting & Research, is in 25th place after making 26.24 per cent over 2017 to date. Managed by Robin Geffen, the £88.8m fund was in the IA Flexible Investment sector’s fourth and third quartiles in 2016 and 2015 but in the top decile in both 2014 and 2013; this means it is currently the peer group’s second best performer over five years with a 107.69 per cent gain.
Square Mile said: “We see this fund as one of the purest expressions of Neptune's macroeconomic views, global sector based investment process and company analysis. It has a truly unconstrained and high conviction approach and the manager is not afraid to aggressively reposition the portfolio should Neptune's investment outlook change.”
Performance of fund vs sector over 2017
Source: FE Analytics
The £293.7m Pictet Global Environmental Opportunities fund is in 34th place on the list of 99 funds thanks to its top-decile 23.94 per cent return this year. The fund, which is managed by Luciano Diana, Gabriel Micheli and Simon Gottelier, invests in companies that are active throughout the environmental value chain and is top quartile in the IA Global sector over one, three and five years.
FE Invest said: “Pictet is a pioneer in sustainable thematic investment and it likes to invest across all aspects of each megatrend. Its focus on specific, often under-researched sectors provides investors with the unique opportunity to diversify through largely untouched investment areas.”
The other top-decile smaller funds to appear on the FE Invest Approved List are Aberdeen European Property Share and Royal London Sustainable Managed Growth Trust, while Royal London Index Linked and Vanguard UK Long Duration Gilt Index are rated ‘A’ and ‘Recommended’ respectively by Square Mile.