While the traditional adage of investing for the long term holds true through market upsets such as now, it doesn’t negate investor nervousness. When almost 90% of all IMA-sector constituent funds have lost money through this summer turmoil, that nervousness understandably grows.
Still, that stat also implies that more than 10% of managers have been able to navigate through market volatility and uncertainty. Based on FE Analytics data, from 1 July to 19 August, 301 funds out of 2,666 across all the IMA sectors have realised positive returns.
The majority of the 301 are invested in lower risk assets such as gilts, index-linked, gold or cash. Also mixed in this group are a number of corporate bond and property portfolios, plus a small handful of private client and multi-manager offerings. Of the 71 absolute return offerings, 17 have made gains.
Looking across the equity-based funds that have risen this summer, three are invested in Japan. In fact, across the entire IMA universe, over this very brief time period, the best return of 13.52% was achieved by LeggMason Japan. Managed by Hideo Shiozumi, the £63m fund is an all-cap portfolio with more than 50% invested in companies smaller than £1bn in assets. The other two Japan portfolios on gains are: JPM Japan and FF&P Japan Equity.
All of the portfolios in the IMA’s China, Global emerging markets, European, North America and UK sectors (including equity income) have made losses. Within the IMA Global sector, only MFM’s CPI Global Opportunities fund rose over July and into August.
Despite being able to invest heavily in fixed interest as well as other assets, just two Balanced funds made positive gains: Troy’s Trojan Fund and Miton Strategic Portfolio. Six out of 168 funds in the Cautious Managed sector are in positive territory, although two are bond-focused and another two are private client funds. JPM Cautious Total Return and Baring Multi Asset have also preserved capital during the market falls so far this summer.
Select funds achieve absolute return
Although less than a quarter of all the absolute return offerings have made gains during this volatile period, the percentage is certainly higher than in the relative sectors. In addition, while the AR sector is a mixed bag of offerings, it has not solely been the pure fixed income offerings on the up.
The top three best performers from 1 July to 19 August are global macro strategies (Eclectica, Old Mutual and Jupiter Absolute Return). All rose by more than 4.5%.
Absolute return strategies have been slated of late for failing to meet investor expectations and not preserving capital as markets fall. With 54 out of 71 on losses over the summer months, that would appear to be justified. However, it is worth remembering that several have done what they state.
For example, the best performer across all three of the IMA’s European equity sectors has fallen by 9.12%. However, within the AR sector, Liontrust European Absolute Return has gained 3.57% (ranking it fourth) and Blackrock European Absolute Alpha is up 2.38% (ranked sixth).
It is conditions such as these for which absolute return funds were launched in the first place. After all, of the 71 members of the IMA’s absolute return sector, only 25 feature three-year track records, while just 12 date back five years.
It would appear there remains much to be said of many of the offerings in this space being ‘me too’ products and just opportunistic launches. Yet while many may fare better over the long term, several are already holding up their image as ‘hedge fund-lite’ options, suitable when markets are falling.
