Which were the best-performing Rated Funds over the second quarter?

Investment trusts dominate the list of best-performing Rated Funds in the second quarter of 2018.

Among the top 10 Rated Funds for the second quarter, those with a global growth or US equity focus stood out, as well as those focused on UK smaller companies.

The dollar’s rise against sterling over the quarter helped to propel global and US-focused funds to the top of the leaderboard. It was also beneficial for the FTSE 100 index, as up to 80 per cent of earnings from the index’s constituents are sourced in dollars.

Comparing index returns in local currencies with returns converted to sterling illustrates the point. The S&P 500 rose by 3.3 per cent over the second quarter, but for sterling investors the return was 9.7 per cent. The FTSE 100 index also increased by 9.6 per cent. For investors in global equities, the sterling return from the MSCI World index was 8.1 per cent, compared with 3.6 per cent in local currencies.

The best-performing Rated Fund in the second quarter was one of the first quarter’s worst. Guinness Global Energy rocketed to a 23 per cent gain on the back of strong stock selection, buoyant oil prices and a rising dollar – the greenback was up more than 8 per cent against the pound over the quarter.

The dollar’s strong showing added to the returns from globally focused funds and trusts, particularly technology-oriented trusts Scottish Mortgage (up 20.2 per cent) and Allianz Technology (up 17.8 per cent). Investors in both also benefited from a rise in their share price premiums to net asset value: by 2.5 per cent for SMT and 3.6 per cent for ATT.

Edinburgh Worldwide, a stablemate of Scottish Mortgage, also has a decent slug of technology exposure and recorded strong gains of 16.4 per cent from its less-focused and more internationally diversified portfolio of global smaller companies.

Three purely US-focused Rated Funds made the top 10, led by Artemis US Smaller Companies. US investing veteran Cormac Weldon has an excellent record of delivering good returns through various market cycles, exemplified by its 18 per cent gain in the second quarter.

Aberdeen Standard-managed North American Income bounced back from a relatively disappointing year: its 14 per cent gain over the quarter accounts for the lion’s share of a 17.5 per cent gain over the past year, and was aided by a 4 per cent contraction in its discount to NAV.

Similar comments apply to JPMorgan US Smaller Companies, because its 13.8 per cent gain over the quarter have now trumped the gain over the past year.

Belying increasing uncertainty over the fate of Brexit negotiations, UK smaller companies trusts also continue to prove popular: two trusts and one fund make the top 10 list, led by BlackRock Throgmorton trust.

Investors have warmed to the trust’s new management structure. Dan Whitestone, who previously ran the trust’s portfolio of contracts for differences, became lead manager of the trust earlier in the year and in the past quarter the discount has narrowed by 4 per cent, which contributed to its 16.9 per cent share price return. Whitestone replaced Mike Prentis as lead manager and the trust’s ability to invest in both long and short positions clearly differentiates Throgmorton from BlackRock Smaller Companies, which Prentis continues to manage.

Henderson Smaller Companies trust, which has one of the best long-term records in the sector under manager Neil Hermon, also benefited from a 3 per cent contraction in its discount, taking its share price gain to 14.2 per cent over the quarter.

TB Amati UK Smaller Companies completes the top 10 line-up with a 13.8 per cent gain. Its strong investment process and performance, overseen by a longstanding management team, was recently recognised with a Bronze Morningstar Analyst Rating.

Best actively managed rated funds in 2nd quarter              
    3 months 6 months 2017/18 2016/17 2015/16 After 3 yrs
    % % % % % %
The top 10 performers Rated Fund asset group            
Guinness Global Energy X GBP in GB Specialist 23.0 13.1 27.1 -4.2 2.4 24.8
Scottish Mortgage IT Global growth 20.2 18.4 33.4 48.8 4.9 108.2
Artemis US Smaller Companies I Acc US equities 18.0 14.9 22.2 31.8 14.1 83.6
Allianz Technology IT Specialist 17.8 21.9 45.3 58.2 2.3 135.2
BlackRock Throgmorton IT UK smaller companies 16.9 19.1 34.3 46.8 -7.3 82.8
Edinburgh Worldwide IT Global growth 16.4 17.3 44.9 42.0 -10.9 83.2
Henderson Smaller Companies IT UK smaller companies 14.2 9.3 28.6 39.6 -11.3 59.2
North American Income IT US equities 14.0 2.5 17.5 27.1 23.5 84.4
TB Amati UK Smaller Companies B Acc UK smaller companies 13.8 11.6 33.6 40.5 7.7 102.1
JP Morgan US Smaller Companies IT US equities 13.8 2.7 12.6 48.5 6.3 77.7

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