Investment opportunities in artificial intelligence
It’s now week 38 of working from home for this FundCalibre employee. While I don’t miss the commute,...
As we start the New Year in a new lockdown, still with the hope that this could be the last major leg of the pandemic, FundCalibre identifies 12 funds to watch in 2021:
2020 saw a number of announcements that veteran fund managers would stepping back from fund management in 2021. With well-signed succession planning and lengthy handovers, here are three examples:
Marlborough Special Situations – Giles Hargreaves had run this fund since 1998 and it was the best performing fund in its sector over his tenure returning 3,760% compared with 641% for its average peer*. He hands over to Eustace Santa Barbara, who has co-managed the fund since 2014 and Guy Feld, his co-manager on Marlborough UK Micro-Cap Growth fund, which has also been handed over to the same duo.
BlackRock European Dynamic – Alister Hibbert handed the management of this fund to Giles Rothbarth at the end of 2020. Alister had run the fund since March 2008, returning 430% compared to 131% for the average peer**. Again, it was the best performing fund in the sector over his tenure. Giles has been co-manager since 2019 and is an impressive manager from a very strong team. Due to his short tenure, the fund moves to an Elite Radar.
Schroder Asian Alpha Plus – Manager Matthew Dobbs is handing over this fund to Richard Sennitt in March 2021. Richard, who is the Elite Rated Manager of Schroder Asian Income, has worked alongside Matthew for many years and will run it in the same way and with the same process. Over Matthew’s tenure so far, the fund is the second best in the sector returning 340% compared with 169% for the average fund***.
2020 was an extraordinary year. Bushfires, floods, swarms of locust, pandemics, racism and oil spills made the headlines. It was almost biblical at times and was a roller-coaster ride for investors. Some fund managers excelled in the new environment – can they repeat their success in 2021?
Baillie Gifford American – this fund was the best performing open-ended fund in 2020. Run by a team of four co-managers who focus on the small number of companies that create exceptional returns, it returned 122% in 2020 versus 16% for the average peer^.
Scottish Mortgage Investment Trust – this was the second best performing Elite Rated product. The managers look for higher growth prospects around the world, focusing on finding tomorrow’s winners. The largest holding is currently Tesla^^, whose share price rose around 600% in 2020^^^. The trust returned 110% versus 15% for the average peer^.
Fidelity China Special Situations – this was the third best performer on FundCalibre. Run by Dale Nicholls, this trust has a bias towards small and medium-sized companies and offers investors direct exposure to the China growth story. It returned 69% in 2020 compared to a sector average of 28%^.
Read more about the best performing funds of 2020 here.
A third anniversary is a real milestone in the investment world, as three years 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.
Rathbone Global Sustainability – This fund turns three in July. A high conviction global equity fund that can invest in companies of any size, it is run by David Harrison who focuses on selecting stocks with strong cash generation and will actively avoid businesses involved in unethical or unsustainable practices.
TM CRUX UK Special Situations – This fund is run by Richard Penny and celebrates its third birthday in September. It invests in UK companies of all sizes but will typically have more of a focus on medium and smaller companies. There will be some FTSE 100 names and a few carefully chosen AIM-listed companies.
Federated Hermes Global Emerging Markets SMID Equity – Launched in September 2018, this fund focuses on small and medium-sized companies across global emerging markets. It is co-managed by Gary Greenberg and Kunjal Gala. Kunal will become lead manager in 2022, when Gary retires.
While some areas like technology did well in 2020, others did not. For example, trading in physical property funds was suspended and Brazil was one of only two countries (Russia being the second) that managed to underperform the much unloved UK market, dragging the rest of Latin America down with it.
TIME:Commercial Long Income – this fund invests in commercial freehold ground rents and commercial freehold property, which benefit from long leases. While the fund is still suspended, around 80% of rents have been collected during the pandemic and the managers are optimistic that annual income should continue to be around 3%.
ASI Latin American Equity – After a good 2019, 2020 was dire for the region. The hope of a strong economic rebound could turn things around in 2021. The team behind this fund looks to identify and build large positions in high quality companies that are trading at reasonable valuations. Four to five company visits usually take place before an investment is made.
LF Gresham House UK Multi Cap Income – This multi-cap fund has a strong process and benefits from manager Ken Wotton’s unrivalled expertise in the small-cap space. The UK Equity Income sector was the worst performing sector of all in 2020, losing almost 11% on average^. This fund was down less than 6%^. With a Brexit deal and vaccine roll-out it’s hoped the UK market will catch up in 2021.
*Source: FE fundinfo, total returns in sterling, 1 July 1998 to 31 December 2020.
**Source: FE fundinfo, total returns in sterling, 1 March 2008 to 31 December 2020.
***Source: FE fundinfo, total returns in sterling, 30 November 2007 to 6 January 2021.
^Source: FE fundinfo, total returns in sterling, calendar year 2020