It’s been a challenging year to turn a decent profit. Holly Black casts an eye over our most and least successful tips from the January 2018 Wealth Creation Guide.
A significant stock market sell-off in October hit many investment funds and trusts hard. Over recent years we have become accustomed to seeing double-digit returns from many of our investment picks, but this year finds much of the cohort in the red. In times such as these, it is those holdings which can provide much-needed downside protection and beat their benchmark that shine.
Global holding Fundsmith Equity has proved it can still outperform when the going gets tough. The fund, which backs big US names such as Microsoft and Paypal, has retained its top-quartile position and produced a return of 6.3% over the past 12 months (to 27 November), compared to an average loss of 0.7% among its peers.
River and Mercantile Global Recovery has fared less well, however. The fund, which was renamed from World Recovery in July, is down 8.9%. Its 12% weighting to Chinese equities, including internet company Baidu, may have held back performance. The region has lagged this year as growth has slowed and investors become more concerned about the effect of a trade war with the US on the Chinese economy.
Decent dividend elusive
While interest rates have started to rise in the UK, they are doing so slowly, so decent income remains elusive for many investors. Schroder Income is a standout performer among our UK equity income picks in this respect: as well as yielding 3.5%, it has delivered a return of 8% over the past year, while the average UK equity income fund is down 3.6%. Kevin Murphy and Nick Kirrage’s value approach has benefited in the recent rout.
But Woodford Equity Income has continued to disappoint. The fund, which has lost 9.3% over the year, has seen significant outflows as disgruntled investors have jumped ship. Investments in Capita and Kier Group are among those that have weighed on performance. Feted fund manager Neil Woodford has admitted the past two years have been among the most difficult of his career.
With a return of 14% over the past 12 months, Greencoat UK Wind has delivered the strongest performance of all our investment tips. The investment company owns wind farms across the UK from Scotland to Kent, and generates a return from the sale of the power it generates.
At the other end of the spectrum, one of our specialist picks BlackRock Gold & General is the worst performer among our tips, having lost a hefty 17.8% over the year.
L&G UK Property led the way among our property picks for the year, proving that despite the uncertainty hanging over the sector, there are still gains to be made – the fund returned 7.9% over the year and has a 3.1% yield. The team are focusing on industrial space, which accounts for 34.4% of assets and has become an important part of property portfolios as the shift to online shopping means there is a greater need for warehouse and logistics space.
The appeal of multi-asset funds becomes increasingly evident as volatility has picked up. Aberdeen Diversified Income & Growth Trust takes a fund of funds approach and currently has just 18.5% of its assets in equities. It has delivered a return of 6.6% over the past year.