Unpopular investments, such as gold and emerging markets, have topped the list for raking in the best returns so far this year.
Figures published this week by ratings agency FundCalibre show Latin American equities, emerging market bonds and gold have been the best performers in 2016.
The BlackRock Gold & General fund reached the top spot in the list of ‘Elite Rated’ funds after returning 39 per cent, while the Aberdeen Latin America fund came second, returning almost 21 per cent.
This comes after BlackRock reported on 22 March that its Latin American trust has turned a corner since the start of the year, with its share price increasing by 9.5 per cent last month, after a brutal 42.8 per cent fall in its NAV over the past three years.
Clive Hale, director at FundCalibre, said markets have been all over the place since the start of the year and it’s been the unloved areas that have fared best.
“Gold has come into its own as investors have flocked to it as a perceived safe haven,” he said, describing it as “an insurance policy against central bank stupidity”.
Mr Hale added: “It’s too early to say if the precious metal has bottomed, but anyone taking the plunge in January has been very well rewarded.”
With the two Aberdeen funds scoring highly, Mr Hale questioned whether it could be the turnaround which patient investors have been waiting for.
“It’s a very short period of time to be looking at, but both the Latin America and emerging markets funds have outperformed their indices by 40-50 per cent, which is good going.
“It’s also too early to say that emerging markets are finally coming out of their doldrums, but it is a reminder that you can make money in all types of market conditions.”
FundCalibre rates 137 funds ranging across equity types and bonds.
“Last year we became interested in gold again simply because it had become less popular.” James SpenceJames Spence, managing partner at Cerno Capital, commented that one reason they sold gold in 2012 was because it had become present in nearly every portfolio and had more or less become a default holding for investors.
“It was a very painful bear market from 1800/oz to close to 1000oz on gold and investors shaved their holdings on the way down, so it gradually disappeared from portfolios. Last year we became interested in it again, partly because it had become less popular.”
He also suggested that speculative interest had given way to strategic holding of the precious metal, saying “it makes sense to own assets that can behave in an inverse manner to others”.
Mr Spence said his research suggests gold is not a great inflationary protection asset, but he argued it is a good when there is a big change in the inflationary expectations, whether that’s up or down.
Darius McDermott, managing director of Chelsea Financial Services - which has a majority stake in Fund Calibre - said that contrarian investors who buy things that everyone else hates can occasionally make some good money in quick time.
“Pretty much everything was falling in the first four to five weeks of the year, and anything with commodity exposure or China exposure was falling pretty heavily.
“People are starting to look where the value is,” he said, pointing out that after being sold-off for a number of years, investments in emerging markets are cheap again.
katherine.denham@ft.com
