Source: Lipper, 31.12.2017 to30.06.2018, percentage growth, total return. Past performance should not be seen as an indication of future performance.
There was little change in the consistency figures for this quarter, with the feat remaining challenging. Looking beneath the headline figures is interesting, with the three most consistently top quartile £ Corporate Bond funds being long duration focused, and a significant skew to “growth” mandates in the equity entries. The key point here is how repeatable is this trend? If we look in the broader “above average” measure there is a proliferation of passive funds. Should we see a change in the expectations of future interest rates and therefore a shift in the yield curve it would take a very different mandate to outperform in both areas of investment.
Identifying the best and worst performers in the quarter across all 36 IA sectors.
The second quarter of 2018 brought with it a return to more positive market moves that saw most IA sectors gain ground.
The combination of a strong dollar and political change weighed heavily on emerging markets, while the general appetite for tech and an uptick in economic numbers buoyed North American linked sectors.
The IA North American Smaller Companies sector was the best performing sector gaining 16%, with the IA Technology & Telecoms sector next best rising 14.4%. On the flipside the IA Global Emerging Markets Bond sector was the laggard returning -3.4% with the IA Global Emerging Markets sector the next worst falling 2.6%.
The IA UK All Companies sector was the strongest performer of the UK equity sectors rising 9.1% with the IA UK Smaller Companies sector close behind rising 8.7%. The IA UK Equity Income sector at the back of the pack rising 8.3%.
The IA UK Gilt sector led in the UK bond space rising 0.3%, with the IA £ Corporate Bond sector next best falling 0.2%. The IA UK Index Linked Gilt sector was the worst of the UK bond sectors falling 0.5%. The IA £ High Yield and IA £ Strategic Bond sectors were close behind, both falling 0.4%. The IA Global Bond sector outperformed all UK Bonds sectors gaining 0.9% in comparison.
The IA Targeted Absolute Return sector scraped a positive return of +0.2% in the quarter. The 12-month return for the sector remains paltry at +0.4%.
Looking at the Mixed Asset IA sectors, the exposure to equity dictated the ranking of the sectors with the IA Mixed Investment 40-85% Shares sector leading the pack rising 4.9%. The IA Mixed Investment 20-60% Shares sector was the next best gaining 2.9% with the IA Mixed Investment 0-35% Shares the laggard rising 1.8%.
Predictably, the IA Global Equity sector outperformed the IA Global Equity Income sector in the quarter rising 7.9% versus 5.9% respectively.
It was an interesting quarter in currency markets where fear and the actions of central bankers resulted in significant shifts. Sterling suffered generally due to Brexit fears, while the dollar benefited from both a rise in interest rates from the Federal Reserve but also through a flight to safety as tensions mounted over global trade wars.
Can you have your cake and eat it? Here we search for funds with good risk characteristics and establish which funds offer the holy grail of low risk and high returns. For this purpose, a longer time period is required, so we look back over three years to the end of the quarter.
Measured to the end of Q2 2018, yet again no fund achieved the perfect mix of top of the sector 3-year returns with bottom of the sector 3-year volatility. Worthy of mention are the Man GLG Continental European Growth which achieved 3rd percentile returns and 98th percentile risk and the TB Evenload Income Fund achieving 5th percentile returns and 98th percentile risk.
In summary, we believe the performance numbers are – as always – well worth crunching to find trends, provide ideas, layer knowledge on how each fund performs and to generally provoke thought.
Of course, the analysis must be taken in context, and the qualitative work must be done to allow for fully informed judgments. We hope you found this review interesting, and if you have any questions, contact us.