Sector review
After a traumatic start to the year, the FTSE 100 index has pretty much moved sideways within a 6000 to 6200 band for the past couple of months, apart from a brief foray up towards 6400. It remains 12% down compared with a year ago – when it was in the realm of 7000.
That lack of decisive direction – a pattern mirrored to a greater or lesser extent across other major indices – has made for uninspiring performances among the fund sectors over the past few weeks.
The top of the sector performance table over one month to 11 May is dominated by an unlikely mix of Japanese equity and sterling bond funds, according to Trustnet – none of them exactly setting the world on fire.
1 Japanese Smaller Companies: 21.3%
2 North American Smaller Cos: 16.4%
3 North America: 12.9%
4 Specialist: 12.8%
5 Japan: 12.4%
Apart from Japan, almost all equity sectors have lost value: Global Emerging Markets is down over 3% while China and Greater China has fallen by almost 5%. The Technology sector has also struggled, down 3.5%.
On a three-month perspective, however, returns look much rosier, with 15 sectors – all equity based – showing double-digit returns.
1 Japanese Smaller Companies: 21.3%
2 North American Smaller Cos: 16.4%
3 North America: 12.9%
4 Specialist: 12.8%
5 Japan: 12.4%
The dramatically different line-up for investment trust sectors over both timeframes highlights the extent of 2016’s recovery for certain unloved areas. Latin America and commodities dominate both the one and three-month tables, with huge share price gains (albeit from low starting points following years of painful losses).
Over one month the top five sectors look like this:
1 Country specialist Latin America: 13.9%
2 Commodities and natural resources: 8.8%
3 Litigation: 5.1%
4 Latin America: 4.3%
5 Utilities: 4.3%
It’s also notable that trusts have outperformed funds overall this month. Only around a third of investment trust sectors have actually lost value; and – in contrast to the situation with open-ended funds – a number of major equity sectors have registered reasonable gains, including global, Europe and North America.
However, some of the most popular growth-oriented areas of investment currently languish at the bottom of the table over one month, including global smaller companies and biotechnology.
Turning to individual funds, the same few names dominate leading online brokers’ most-bought tables for April, focusing on the UK sectors and global funds.
For instance, investors with Hargreaves Lansdown have clearly been favouring quality, consistency, and low turnover, with UK-focused CF Lindsell Train UK Equity and Woodford Equity Income and global fund Fundsmith Equity hogging the top three slots. Stewart Investors Asia Pacific Leaders was the only regional fund in the top 10.
Big global trusts, meanwhile, dominate Interactive Investor’s list of the most-bought trusts list for April, with Scottish Mortgage a firm fixture at the top of the list every month but one since February 2014 – despite its relatively lacklustre performance over the last 12 months.
Witan, Bankers, City of London and Finsbury Growth and Income all hold top ten places. However, there’s rather more diversity among trust choices than funds: for instance BlackRock World Mining is in fourth spot, pulling in the punters with a 38% share price return over three months.
Capital preservation-focused RIT Capital Partners is a new entrant to the top ten, suggesting some investors may be hoping to ‘batten down the hatches’ ahead of the possible market disruption of a Brexit vote.
The top ten most-bought trusts look like this:
1 Scottish Mortgage (1 month share price total return): -2.8%
2 Witan: -1.1%
3 Woodford Patient Capital: 4.1%
4 BlackRock World Mining: 9.9%
5 Bankers Trust: 0.6%
6 City of London Trust: 0.5%
7 Finsbury Growth & Income: -3.2%
8 Biotech Growth: -5.5%
9 Jupiter European Opportunities: -1%
10 RIT Capital Partners: -1.2%
