Moneywise Fund Awards 2015: part 1
Investing at the best of times can be a daunting proposition and 2015 has certainly been a rollercoaster. Following a prolonged period of relative calm, this year has proved much more turbulent for stockmarkets.
Gains early in the first half were subsequently wiped out over the summer on the back of concerns over the global economy slowing.
But successful investing, be it saving into your Isa or for your retirement, is about patience and being in it for the long term. After all, had you been brave enough to put money into the UK market at the nadir of the financial crisis in March 2009, you would today be sitting on a total return of more than 100%.
However, with more than 2,000 funds on offer, selecting the right ones can be challenging. Whatever your strategy, this year’s Moneywise Fund Awards will help you select the right portfolios for you. Whether it is a straightforward UK growth fund, a fund to generate an income or something a little more adventurous, we have it covered.
UK ALL COMPANIES
WINNER: MFM Slater Growth Fund
HIGHLY COMMENDED: Standard Life Investments UK Equity Unconstrained Fund
There’s no place like home for British investors. The UK All Companies sector still leads the way in terms of being the biggest fund category, with a massive £156.7 billion in assets under management. It has been a volatile year for the UK market, with the FTSE 100 breaking though the 7000 mark for the very first time, only to slide rapidly back down during the subsequent market upheaval.
Adrian Lowcock, Axa Wealth head of investing, says: “The falls over the summer have created further investment opportunities but investors need to be careful. Finding the right manager in this environment will help avoid those value traps while identifying opportunities.” Given the size of the sector, there is no shortage of funds to choose from but the winner this year is the MFM Slater Growth fund, managed by Graham Englefield.
Lowcock says: “The fund aims to achieve long- term capital growth by investing in companies that exhibit superior, sustainable growth potential that the manager believes is not reflected in the share price.”
In second place is last year’s winner, the Standard Life Investments UK Equity Unconstrained fund.
Patrick Connolly, a certified planner at Chase de Vere, says: “Fund manager Wes McCoy has recently taken over this fund from Ed Legget, who did a fantastic job in his seven years in charge. It is a high-conviction fund, and no significant changes have been made to the portfolio or the process since McCoy took over.”
UK EQUITY INCOME
WINNER: Unicorn UK Income Fund
HIGHLY COMMENDED: PFS Chelverton UK Equity Fund
With interest rates now stuck at their all-time low of 0.5% for more than six and a half years, the appetite for income has never been greater. Thousands of savers have become investors and piled into Equity Income funds – portfolios that invest in dividend-paying firms in a bid to get their cash working harder. They were the top- selling fund type last year and this popularity has spilled well into 2015.
Taking the top spot once again this year is the Unicorn UK Income fund. The portfolio was previously run by the highly respected John McClure, who sadly passed away in 2014. Connolly says: “It has since been picked up by Fraser Mackersie and Simon Moon, who are continuing McClure’s good work. The portfolio is heavily focused on mid- and small-cap stocks and so is likely to be more volatile than many others in the sector, although potentially also with continuing better growth prospects.”
Runner-up and highly commended once again this year is the PFS Chelverton UK Equity Income portfolio, run by David Taylor and David Horner. Gavin Haynes, managing director of Whitechurch Securities, says: “This fund has produced excellent returns for investors through investing in dividend- producing small UK companies.”
UK SMALLER COMPANIES
WINNER: Fidelity UK Smaller Co's Fund
HIGHLY COMMENDED: River & Mercantile UK Equity Smaller Companies Fund
UK Smaller Companies funds tend to be more risky than funds in the UK All Companies sector. But it comes with the promise of greater returns, and the sector has had a stellar few years. A glance at performance over recent times highlights this point, with the categories delivering respective total average returns of 84% versus 48% for UK All Companies in the past five years. Some funds have had to close their doors to new investors because they were getting too big and liquidity concerns took hold. One such fund is 2013 winner Fidelity UK Smaller Companies, run by Alex Wright and Jonathan Winton. However, the portfolio has since reopened its doors and is once again a winner. Lowcock says: “Alex adopts a contrarian approach looking for unloved and undervalued businesses. Strict portfolio management allows him to run his winners but not carry additional risk. Connolly adds: “Co-manager Alex Wright is one of the premier smaller company managers. The fund invests across small cap and often includes a significant exposure to mid-cap stocks.”
Highly commended is 2014’s winner, River & Mercantile UK Equity Smaller Companies, which is managed by Philip Rodrigs. Darius McDermott, managing director of Chelsea Financial Services, says: “It’s a very old City name with a thoroughly modern way of investing in smaller UK companies. The portfolio is managed using a distinctive investment process, supported by an efficient and sophisticated screening process.”
WINNER: Kames Investment Grade Bond Fund
HIGHLY COMMENDED: Rathbone Ethical Bond Fund
Bond funds in general, and especially corporate bonds – essentially IOUs issued by firms looking to raise cash – are traditionally viewed as one of the safer bets. As a result, they are a staple investment in many an investor’s portfolio. But the threat of higher interest rates, which never bodes well for bonds, has made many nervous.
In September alone, bond funds endured their highest net outflow, at £515 million, since June 2013. While these funds still have their place in any balanced portfolio, picking the right manager is key. The gap between first and second place was very tight, but taking top spot this year is the Kames Investment Grade Bond fund, run by he Stephen Snowden and Euan McNeil.
McDermott believes Kames is one of the “go to” names in the bond space. He says: “The managers of this fund are building an enviable track record. This fund gives exposure to the investment-grade sector, but in a vehicle that is still nimble enough to react quickly to changing market conditions.” In very close second place is Rathbone Ethical Bond, also last year’s runner-up. Connolly says: “While the ‘ethical’ name might put off some investors, this is an excellent fund in its own right. It is a high-conviction fund, paying a competitive income and which generates very strong, risk-adjusted returns.”
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.