Diversification is not a buzzword – it’s a necessity
Investing is often likened to a journey, with the destination being financial success. Along this...
As we start a new year, FundCalibre’s research team takes a look at the funds and trusts we
think you should be watching in 2023:
A third anniversary is a real milestone in the investment world, as it is deemed to be a long enough period to properly assess a fund manager’s skills. It is also the minimum tenure required for a fund to be considered for an Elite Rating.
Launched in March 2020, this is a multi-cap UK equity fund is run by the highly-experienced Rosemary Banyard. It has a well-defined process looking for companies that have sustained competitive advantages, with low debt and good management teams. Despite having a bias towards small and mid-caps, which have really suffered in recent times, the fund has so far returned 47% for investors vs 52% for the IA UK All Companies sector average*.
This fund is an extension of abrdn’s successful small and mid-cap desk and targets the ‘next 15%’ in market cap size up from smaller companies. It is run by Anjli Shah and the process is based around abrdn’s powerful screening tool ‘Matrix’. Again, despite a market-cap and style headwind for the past 12-18 months, the fund has so far returned a respectable 31% for investors vs an average 36.6% for the IA Global sector average**.
2022 was a tough year for most asset classes. War in Ukraine, persistently high inflation and rising interest rates all took their toll on markets. Equities, bonds, and property all fell. Some funds managed to buck the trend – but will they be able to maintain their good performance in 2023?
Everything around us is insured, regardless of economic boom or bust, which provides this fund with very good defensive characteristics. The fund has been co-managed by Nick Martin since 2008 and he took on full responsibilities in 2016. Its consistent track record offers a good return profile for portfolio diversification. The fund returned an impressive 20.2% in 2022 and it was the best performing fund in its sector***.
Nick talked more about performance and the fact the insurance can be a good place for investors
in uncertain times in this recent video interview:
This trust offers exposure to international equities, as well as some bonds. We like the fact the trust focuses on defensive business where the managers feel they will be able to retain both earnings and dividends, without paying over the odds. It returned 18.9% in 2022 and was the top performing fund in its sector***.
Co-manager Sam Fitzpatrick discussed the trust’s recent outperformance and the contribution of emerging markets in this video interview. She also gave her views on whether the portfolio is potentially better able to weather the market volatility and potential recession than others.
Two of the worst performing sectors in 2022 were IA UK Smaller Companies and IA Technology
and Technology Innovations. The average fund in these peer groups made a loss of 25.7% and
Managed by Simon Moon and Alex Game, this fund did relatively well last year, losing roughly 10 percentage points less than the sector average – placing it fifth out of 50 funds***. It’s a small, flexible fund with a solid investment process and a highly competent team. It is also quite concentrated, which allows it to capture the performance from its best ideas.
It is important in any fund to avoid the losers but no more so than in the technology sector. Manager Jeremy Gleeson’s level-headed commitment to finding new opportunities with strong commercial potential, and ignoring yesterday’s winners, coupled with his and his team’s vast experience, makes this fund an appealing option for investors seeking technology exposure. And, despite some high-profile disappointments in 2022, there were a number of good earnings surprises in the sector, which bodes well for the coming year.
Jeremy told us more about the opportunities in the technology space in this podcast recorded in
Bond funds had a torrid 2022. Every area of fixed income struggled as high inflation pushed interest rates up quickly and significantly. Rapidly rising yields led to rapidly falling prices. But with rates expected to peak in the first half of 2023, and fixed income now paying an attractive level of income, many believe the outlook for bonds is positive this year.
This predominantly investment grade corporate bond fund combines the benefits of an experienced lead decision maker, Ben Edwards, with BlackRock’s vast resources. We like this fund’s flexible mandate and Ben’s track record of consistently exploiting inefficiencies in the fixed income market.
A sector as vast as that of strategic bonds needs a manager who has the ability to accurately read the economic environment, as well as pick individual investments. Dickie Hodges has repeatedly shown he is capable of doing both. He is incredibly knowledgeable about bond securities and derivatives and uses this skillset and a flexible mandate, to exploit opportunities.
*Source: FE fundinfo, total returns in sterling, 17 March 2020 to 14 December 2022
**Source: FE fundinfo, total returns in sterling, 22 April 2020 to 14 December 2022
***Source: FE fund info, total returns in sterling, 31 December 2021 to 14 December 2022
Past performance is not a reliable guide to future returns. You may not get back the amount
originally invested, and tax rules can change over time. The views expressed are those of
FundCalibre’s research team and do not constitute financial advice.