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Autumn Investments Monitor - SeptemberThe past five years have seen stockmarkets rise, fall, and rise again numerous times over.
For fund managers, it has certainly been a trying time and while some have delivered outstanding performance, others have had a more difficult experience.
In an industry made up of more than 2,000 funds, there will naturally be those that race ahead and others that are consistently playing catch up with the elite. There is also always a handful of underdogs – those that have experienced a few years of bad performance but have, to the surprise of many, turned things around and risen from the ashes.
This year alone has seen star managers such as Fidelity’s Anthony Bolton and BlackRock’s Sam Vecht admit that they have got things wrong but are working hard to put get their funds back on track.
In April 2013, Mr Vecht, discussing the losses on his £130.7m Eastern European trust, said in a statement: “It’s a big sector and I got stocks wrong”. While June this year saw Anthony Bolton pledge a turnaround in performance on the Fidelity China Special Situations fund before he retires in April next year.
Investment Adviser’s Autumn Investment Monitor identifies those managers who have turned around performance in the past five years, taking their funds from fourth quartile to top quartile.
Using data from FE Analytics, the list of turnaround managers was compiled using a simple metric. To be included, the fund must have a five-year track record with the periods running from September 2 to September 2 in each calendar year. Within the five years, the turnaround funds first suffered at least two years of bottom-quartile returns when measured against their sectors and have seen performance improve in subsequent years without slipping back into a lower quartile.
Finally, the fund must have delivered a top-quartile performance in the past 12 months.
The results have been ranked by the performance figure for the past year to September 2 to complete the list of Investment Adviser’s turnaround managers.
Included in the list are well-known names such as Susan Sternglass Noble of the Axa Framlington Financials fund, JPMorgan’s Peter Kirkman and Simon Poncet, and Stewart Cowley for the Old Mutual Managed fund.
The largest fund to appear in the list is the £478.7m CF Ruffer Japanese Equity fund, managed by Kentaro Nishida. When compared against its IMA Flexible Investment sector peer group, this fund has sat in the bottom quartile for four years until jumping to the top quartile based on its September 2012 – September 2013 48.04 per cent return.
Other turnaround managers, such as those at the helm of Templeton Europe and JPM US Smaller Companies funds, have seen a more gradual rise, with performance figures staircasing them through the third and second quartiles of their sectors before recording a top-quartile performance for the time period analysed.
The challenge for the managers in this list going forwards, however, is to stay at the top.
Jenny Lowe is features editor at Investment Adviser
1. JPM US Smaller Companies
Manager(s): Eytan Shapiro and Christopher Jones
Sector: IMA North American Smaller Companies
Assets under management: £31.9m
12-month performance: 32.12%
JP Morgan says: “Since lows in March 2009, US equity markets have posted strong returns. And, as they have historically, small-cap stocks have bounced back more strongly than their large-cap counterparts over this period. The environment has been positive for small-cap growth stocks and more specifically our portfolio which has been positioned for a continuation of the economic recovery.”
2. Guinness Alternative Energy
Manager(s): Matthew Page and Edward Guinness
Sector: IMA Global
Assets under management: $3.7m (£2.4m)
12-month performance: 64.51%
Guinness says: “The sector was aggressively oversold post 2008 – many companies were priced for bankruptcy. Stable, lower installation prices and recovering demand have signalled a dramatic improvement in prospects and share prices across the portfolio, but we believe there is further strong growth to come that is not yet priced in.”
3. CF Ruffer Japanese Equity
Manager(s): Kentaro Nishida
Sector: IMA flexible investment
Assets under management: £478.7m
12-month performance: 48.04%
Ruffer says: “The raise in quartile ranking is probably more to do with the IMA sector the fund is in, namely ‘flexible investment’ and the fact that it’s a Japanese fund, although the fund did correctly anticipate the political changes that have taken place in the country that has helped to drive the stockmarket performance.”
4. Templeton Europe
Manager(s): Dylan Ball, Heather Arnild and Peter Moeschter
Sector: IMA Europe excluding UK
Assets under management: £10m
12-month performance: 35.17%
5. JPM Global Financials
Manager(s): Peter Kirkman and Simon Poncet
Sector: IMA Specialist
Assets under management: £124.2m
12-month performance: 29.20%
JP Morgan says: “The fund has delivered strong returns for our shareholders versus its benchmark and the broader competition. Our emphasis, which has always been on forecasting long-term earnings and understanding profitability in a ‘normalised’ environment, benefited strongly as stock-specific risk increased and the market rewarded fundamental analysis and bottom up stock picking during this period.”
6. Legg Mason US Equity
Manager(s): Mary Chris Gay
Sector: IMA North America
Assets under management: £44.2m
12-month performance: 27.34%
Legg Mason says: “During the great financial crisis, extreme price-to-value gaps opened up in several individual stocks across market sectors, which drove portfolio performance coming out of the crisis bottom. More recently, extreme price-to-value gaps opened up in specific market sectors, specifically financials, technology and healthcare, which were selling near multi-decade valuation lows.”
7. Axa Framlington Financial
Manager(s): Susan Sternglass Noble
Sector: IMA Specialist
Assets under management: £46.7m
12-month performance: 25.84%
Axa Framlington says: “Using a global perspective, the fund invests in well-managed financial services companies with strong earnings power and competitive advantages. Many were undervalued coming out of the financial crisis, and we still see opportunities for solid investment returns as the global economy gradually recovers.”
8. Old Mutual Managed
Manager(s): Stewart Cowley
Sector: IMA Mixed Investment 40-85% Shares
Assets under management: £104.3m
12-month performance: 21.68%
Old Mutual Global Investors says: “There has been no change to this fund. It is a fund-of-funds for OMGI funds which is managed by Stewart Cowley. OMGI Funds continue to deliver strong investment performance returns.”
9. Scottish Widows Ethical
Manager(s): Johnny Russell
Sector: IMA Unclassified
Assets under management: £88.2m
12-month performance: 20.98%
Swip says: “The fund was restructured to include a greater proportion of ideas created by our 14-strong small-cap and global equities team, which has ultimately led to the improved performance of the fund. This review has been done while ensuring commitment to the fund’s pre-determined ethical and sustainable criteria.”
10. Gam Star Asia Pacific Equity
Manager(s): Michael Lai and Ben Williams
Sector: IMA Asia including Japan
Assets under management: $47.2m (£30.4m)
12-month performance: 18.39%
Gam says: “The fund has been much more optimistic about the outlook for Japan in comparison to many competitors who remained sceptical. The yen currency hedge position was a detractor in the past and the negatives of this position have dropped out. Both a minimal exposure to emerging Asia and bottom-up stock selection have helped the fund perform versus the peer group.”