144. Why confusion over conviction will lead to bouts of volatility
Church House Tenax Absolute Return Strategies co-manager James Mahon tells us why low bond prices...
The festive season is well and truly upon us and my childrens’ Father Christmas list had been growing at an exponential rate, so I’m rather glad that it has now been ‘posted’. On the whole they’ve been nice this year, so Christmas morning should be fun.
Speaking of the man in the red and white suit, no ‘Santa Rally’ has appeared as yet. The FTSE is down more than 4% over the first 10 days of December. With all eyes still on Janet Yellen & Co to see if they will finally raise rates next week, I very much doubt we will see markets do much now.
So rather than trying to guess what the next couple of weeks will mean for investments, let’s take a look back to see which funds have been naughty and nice this year.
Top of the good list is Legg Mason IF Japan Equity, which has returned 39.75% this year. There are two other Japanese equity funds in the top ten. Japanese equities have done well for the past three years – since Abe came into power and put ‘Abenomics’ on the map. Things have stalled recently, but I still think they will do well next year. If we have learned anything in the past few years, it is that quantitative easing is good for equities, and Japan has already pumped ten times as much money into the system as the US – an economy that is three times its size. I expect we will see even more in 2016.
European equity funds are also prevalent in the top ten – Europe is also still on the quantitative easing path, along with smaller companies funds.
Top of the naughty list is MFM Junior Oils Trust, which is down 45.5%. Commodities have had an awful time of it lately and no fewer than seven of the ten worst performing funds of 2015 are in this sector. The other three worst performing funds are all invested in Latin American equities, which is perhaps not too surprising when the biggest market, Brazil, is so reliant on commodities doing well.
Looking ahead to 2016 and I think markets could continue to be volatile. So my area of choice for any new investments is targeted absolute return funds. They act as a good diversifier in a wider portfolio and the good ones do what they set out to do.
|Fund name||% return|
|Legg Mason IF Japan Equity||39.75|
|MFM Techinvest Special Situations||33.92|
|Standard Life Investments UK Smaller Companies||26.65|
|JPM Europe Smaller Companies||25.56|
|Premier ConBrio Sanford Deland UK Buffettology||25.31|
|PFS Chelverton UK Equity Growth||24.96|
|Standard Life Investments European Smaller Companies||26.65|
|Lindsell Train Japanese Equity||24.81|
|Baillie Gifford Japanese Smaller Companies||24.25|
|Fund name||% return|
|MFM Junior Oils Trust||-45.50|
|BlackRock GF World Mining||-39.60|
|HSBC GIF Brazilian Equity||-36.02|
|Old Mutual JPM Natural Resources||-35.93|
|JPM Natural Resources||-35.91|
|Baring Global Mining||-35.20|
|First State Global Resources||-34.69|
|JPM Brazil Equity||-34.21|
|Schroder ISF Global Energy||-31.91|
|L0 Funds Global Energy||-31.41|
*Source: FE Analytics, main shareclasses, total returns from 1st December 2015 to 10th December 2015