Rated Funds mid-year review: top performers

Tech, global and US-focused funds have provided rich pickings for investors in Money Observer’s Rated Funds, but none top the returns from our specialist gold selection, reports Andrew Pitts.

Stunning returns have been made by a large cohort of Money Observer’s Rated Funds since we revealed the 2019 members at the end of January.

Our specialist gold selection tops the performance charts (see below), but in a period when markets at large regained their mojo after the bitter disappointments of 2018, it is group of overtly equity growth-oriented US and global selections that have made the most money for investors – with gains of 20% or more recorded by 28 Rated Funds.

Rated Funds mid-year review: laggards and watchlist
- What are Rated Funds and how are they chosen?
Woodford Patient Capital – rating removed

These are led by long-time Money Observer favourite Allianz Technology IT. Its 33% return over six months takes its three-year return to 151%. Manager Walter Price does not just invest in the easy-win tech behemoths – he takes positions across the company size and technology spectrum.

The current top 10 holdings, all US-listed companies that account for 38% of assets, include companies that most investors would be unlikely to be familiar with. Names such as Zscaler, Okta, Square and Cree complement the more familiar Microsoft, Facebook and Alphabet.

Also capitalising on US-led stock market strength are Brown Advisory US Smaller Companies (32% gain after six months) and Baillie Gifford American (up 27%), whose portfolio is also resplendent with familiar tech names. But its 33% exposure to technology media and telecoms is also complemented by a relatively high weighting to consumer products stocks, which account for 27% of the portfolio, a good place to be with US consumer confidence recently rebounding.

Loomis Sayles US Equity Leaders and the tech-heavy Invesco EQQQ Nasdaq 100 ETF also make it into the top 10, with gains of 26% and 25%, respectively. But it is noteworthy to see the ETF iShares Edge S&P 500 Minimum Volatility also populating the top 10, just under the Nasdaq-focused index-tracker, with a 24.2% gain. 

This ETF invests in the 100 least volatile shares of the S&P 500 index. Among its top 10 holdings are companies such as Microsoft, Waste Management, McDonalds, Yum Brands and Warren Buffett’s Berkshire Hathaway.

Returning to the secular growth theme, two other Baillie Gifford-managed investment trusts – Edinburgh Worldwide and Monks – have also rewarded investors with gains of 20%-plus since the end of January and close to 40% since the start of the year.  

Edinburgh Worldwide focuses on global smaller companies and has a high exposure to the secular growth themes favoured by Scottish Mortgage (SMT), but unlike its larger sister trust it must maintain a wide geographic exposure to at least six countries and 15 market sectors.

Monks, meanwhile, is the ‘best ideas’ trust run by the firm’s global alpha team and can be viewed as a lower-octane version of SMT. Investors in the trust have doubled their money over the past three years, a marginally better return than the 93% registered by Scottish Mortgage.

Perennial private investor favourites Fundsmith Equity and Legg Mason IF Japan Equity also make it into the top 10 funds over six months, returning 26% and 24% respectively, although the latter named is certainly more volatile than the former.

On a longer term view, Fundsmith Equity’s focus on strong, giant global companies has rewarded investors with a 70% return over three years. The Legg Mason fund’s focus on small to medium sized Japanese growth companies has yielded a 42% return, but that is eclipsed by its investment trust rival Baillie Gifford Shin Nippon, up 57% over three years. However, Shin Nippon is up just 8% in the past six months.

Perhaps the most notable performance among funds in the top 10 is that of Ardevora Global Equity, a so-called long/short equity fund that aims to minimise risk rather than maximise rewards.

This truly global and highly diversified strategy (the top 10 holdings in the long book would be unfamiliar to most) has generated a return of 27% over six months and 33% year to date. The total number of holdings amounts to more than 300, with roughly one-third of these in short positions (the managers expect the share price of these holdings to fall). The longer-term benefits are also clear to see: the fund has gained 60% over the past three years.

Sterling’s near 8% fall against the US dollar over the six month period have put something of a gloss on these performance numbers, particularly for the funds that are heavily weighted to the US market (ie most of the above).

- Explore more: Money Observer Model Portfolios are built and maintained using our shortlist of Money Observer Rated Funds

Gold regains glitter

Despite a rocketing stockmarket the US dollar has not been immune to weakness as investors respond to the outlook for lower interest rates in the US. That has helped to propel gold to levels not seen in six years.

The World Gold Council reports that central banks bought record amounts of the yellow metal in the first six months of the year. Their $15.7 billion of purchases – backed up by investors flocking back to gold-backed ETFs – has propelled gold’s spot price to $1,440 per troy ounce, or around £1,180 for sterling investors.

The prime beneficiary among our Rated Funds has been LF Ruffer Gold fund, which takes the number one spot over six months with a 40% gain and approaching 50% in the year to date. Manager Paul Kennedy has been fishing in the undervalued small and mid-sized gold-miners space, a strategy that has seen the fund’s return far outstrip that of an investment in fellow Rated Fund iShares Physical Gold. This exchange traded commodity has risen by a more pedestrian, but not unwelcome, 16.5%.

It’s not uncommon to see specialist Rated Funds in the top 10 (and also among the bottom performers due to the inherent volatility of some strategies) and our gold choice is joined by the aforementioned Allianz Technology Trust and Jupiter International Financials.

Guy de Blonay’s £55 million fund (a relative minnow) has powered ahead of its benchmark, the MSCI ACWI Financials index, over the past nine months, having suffered a tumultuous third quarter of 2018. The 64 holdings in the portfolio, led by familiar names such as the UK’s Intermediate Capital, plus Visa, Mastercard, Global Payments and Paypal, have propelled  the fund to a gain of 29% (33% year to date; 60% over three years).

Rated Funds leading the charge in 2019*

        Annual % return
and quartile rank
in year to 31 July:
Name Rated Fund group Return after 6 mths (%) Qtl rank 2019 Rank 2018 Rank 2017 Rank 3-year return Rank
LF Ruffer Gold Specialist 39.9   38.9   1.2   -18.9   14.1  
Allianz Technology IT Specialist 33.0 1 25.1 1 40.9 1 42.3 1 151.0 1
Brown Advisory US Smaller Companies US Equities 31.6 1 26.0 1 16.9 2 14.6 3 68.7 1
Jupiter International Financials Specialist 29.2   15.6   10.4   27.2   62.3  
Ardevora Global Equity Global Equities 27.1 1 19.2 1 16.6 1 15.1 3 60.0 1
Baillie Gifford American US Equities 26.8 1 20.9 1 34.9 1 24.4 1 102.9 1
Loomis Sayles US Equity Leaders US Equities 25.8 1 23.5 1 14.4 2 20.0 1 69.5 1
Fundsmith Equity Global Equities 25.5 1 21.9 1 16.9 1 19.2 2 70.0 1
Invesco EQQQ Nasdaq 100 ETF US Equities 24.6 1 19.0 1 24.3 1 26.1 1 86.6 1
iShares Edge S&P 500 Min Volatility ETF US Equities 24.2 1 21.3 1 13.2 3 6.4 4 46.0 3
Legg Mason IF Japan Equity Japanese Equities 24.2 1 4.1 1 29.7 1 5.1 4 41.9 1
Lindsell Train Global Equity Global Equities 23.2 1 22.4 1 23.6 1 19.8 2 81.2 1
LF Lindsell Train UK Equity UK Equities 23.1 1 17.0 1 12.4 1 15.2 3 51.5 1
Mid Wynd International IT Global Equities 23.1 1 14.8 1 17.0 2 17.0 4 57.2 3
Baring Emerging Europe IT Emerging Mkts 22.8 1 25.9 1 3.1 1 34.8 1 74.8 1
Monks Global Equities 22.5 1 12.4 2 21.8 1 46.7 1 100.9 1
Rathbone Global Opportunities Global Equities 22.5 1 14.2 1 18.8 1 19.3 2 61.8 1
BMO Responsible Global Equity Global Equities 22.2 1 14.8 1 14.4 1 19.4 2 56.9 1
JPMorgan US Smaller Companies IT US Equities 21.6 1 9.2 1 16.7 4 34.0 1 70.7 1
Baillie Gifford European European Equities 21.5 1 6.0 1 7.4 1 29.5 1 47.3 1

* Table shows top 20 of 267 Rated Funds over six months to 31 July 2019. The quartile rankings refer to  a fund's ranking in its official industry sector. Data source: FE Analytics, as at 31 July 2019. 

  • Visit our Rated Funds page where you can review the top and bottom performers overall and in each of the 15 asset groups and access bespoke factsheets for all 267 Rated Funds.  


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