As you know, here at FundCalibre we rate all different types of funds. Many are solid, steady investments that could form the core of a portfolio and aim for consistent growth with volatility that is perhaps lower than, or equal to, the market.
Some funds we rate, though, aim for more aggressive, higher growth and take more risk to get there. These funds might be used as satellite investments in a diversified portfolio, where you may want one or two holdings that ‘shoot for the stars’, as well as your core funds.
The key thing to remember with these types of funds is that they should be viewed as long-term investments. You must be able to wait out shorter term fluctuations in the value of your money, which could go down in value as well as up. If this causes you to lose sleep then these may not be right for you. What’s more, the quality of the fund and the manager make a huge difference in these types of investments, so research is crucial before you choose.
For our more adventurous investors, however, who are happy to tolerate a bit of market movement in pursuit of long-term gains, here are five Elite Funds that have performed quite spectacular flip-flops in recent years – in honour of National Flip Flop Day (and yes, we do mean the footwear!).
Aberdeen Latin American Equity
- Notable flip-flop: Down 26% in 2015 and up 63% in 2016*
With the exception of last year, emerging markets have been out of favour for some time and Latin American economies in particular have been beset with political scandals, corruption, devaluing currencies, inflation and bad debt. Many investors predicted even more dire outcomes for these markets in 2016 as Trump was elected and the US dollar rose (making bonds issued in US dollars even harder to repay). Yet, other factors including a new president in Brazil (himself now under fire, unfortunately) and doubt as to Trump’s ability to tear up trade agreements saw Latin American equities do better than they had in a few years. This fund has continued to do well so far in 2017, returning 10% to date, and researches laboriously each of the companies in which it invests to help alleviate other risks.
Baillie Gifford Japanese
- Notable flip-flop: Up just 0.05% in 2014, up 12% in 2015, and up 34% in 2016*
Japan is perhaps the ultimate market of flip-flops! People commonly refer to the ‘lost decade’ of Japan from the early 90s to the early 2000s, after its asset price bubble burst and the economy sunk into recession and deflation. The country is still struggling to generate inflation even 25-plus years later. Yet, its stock market will have years of incredible returns, preceded by double-digit negatives and then followed up by returns of less than a percent. The fluctuation of the yen currency has also strongly impacted performance. Hope was rejuvenated when prime minister Shinzo Abe was elected with a strong reform plan in 2012, but waivered again as progress lagged. In 2017, investors are positive once more on Japan and this exceptional fund was the best in its sector in 2016 and has returned 150% over the past five years^, despite any macro hiccups.