Ireland’s best performing funds . . . and the worst

Bear in mind when choosing funds that different fund managers charge different fees and this can eat into your share of the pot

Property: its gains must be seen in the context of its recent fails

Property: its gains must be seen in the context of its recent fails

Tue, Apr 29, 2014, 01:15

Who has the fairest fund of them all? If you’re looking for an investment with an element of risk, a fund is always an option for diversifying your portfolio and limiting the possible downside.

While DIRT at upwards of 41 per cent will still eat into any returns you might make, opting for an investment fund, rather than a deposit account, might give you a better chance of earning something on your money.

Depending on what strategy you opt for of course, as some markets could be at risk of over-heating.

Paul Sommerville of for example notes that participation of small traders in the US market is up by about 30 per cent over the past year, as their confidence returns.

However, as a sentiment indicator, this is not a good sign, and if you think that’s a kind of “shoe-shine” boy signal, you might want to tread carefully.

In Ireland, Sommerville has noted increasing inquiries from first-time investors hoping to make some money on Bank of Ireland, rather than put their money on deposit at such low rates of returns.

In Europe, the likelihood of the ECB embarking on some form of quantitative easing programme is increasing, which could offer a boost to stock markets.

Here are some of the best – and the worst - performing funds in Ireland over the past 12 months, according to Moneymate. We just looked at total returns but bear in mind when choosing funds that different fund managers charge different fees and this can eat into your share of the pot.

Irish equity
Best: New Ireland Irish Equity (+35.6%)
Worst: Ulster Bank Secure Iseq 3G (+10.8%)

Irish equities have out-performed global peers in recent years sending funds invested in the Iseq soaring. Of course the sharp rise is due to the scale of the collapse in market in 2008, and while it may have made significant strides, the Iseq , at about 5,000 points, is still lagging its high of 10,041 set in February 2007.

Top of the bunch is the Irish Equity fund from New Ireland, which is managed by State Street Global Advisors.

Another strong performer is the Canada Life/Setanta Irish equity fund, which is up 32 per cent. Previously, the fund was actively managed, but last year the fund manager took the decision to run it as an index fund, on the grounds that demand for Irish equities wasn’t sufficient, while the investment universe was also too small.

Other index funds also performed well, with Irish Life’s fund, which tracks the ISEQ returning almost 30 per cent. It has a 23 per cent allocation to construction giant CRH, with 16.3 per cent invested in Ryanair.

Best: Friends First Corinthian Fund (+131%)
Worst: Zurich Life Australasian Property Fund (-14.4%)

Just a few years ago, Friends First’s Corinthian Fund was in the headlines for all the wrong reasons. It was launched in 2007 and invested in four sites that were let to Superquinn with the plan being to re-develop them. Of course the market had other plans, and investors saw their investment in the fund plummet by about 80 per cent.

Now it’s on the rise again, but its gain must be seen in the context of its decline.

Irish Life’s property fund has also been performing well, with a return of about 30 per cent. It is currently invested in 45 properties spread across the office, retail and industrial sectors, and properties including the ILAC Shopping Centre in Dublin 1 and The Pavillions Shopping Centre in Swords, Co. Dublin. It has recovered much of its losses but is still down by 1 per cent a year over 10 years.

Bottom of the heap is an Australasian property fund from Zurich Life. The Australasia Property Fund invests in the shares of the FTSE EPRA/NAREIT Asia Dividend + Index via an ExchangeTraded Fund (ETF).

The FTSE EPRA/NAREIT Asia Dividend + Index covers property companies and Real Estate Investment Trusts (REITs) that pay a large percentage of their profits as income. One of its largest holdings is in Australia’s Westfield Group, with a 7.7 per cent allocation, but it has its largest geographical allocation (37%) to Hong Kong.

Best: Irish Life Indexed technology (+17.5%)
Worst: Ark Life Future (9%)

Back in March, tech investors celebrated the five year-anniversary of a bull run and the Nasdaq touched a 14-year high. Since then however, the market pulled back significantly on fears that another bubble – like that which brought the boom to a shuddering halt back in 2000 – was on the way.

While it has recovered somewhat, stocks are still off their recent highs. Amazon for example, fell by about 24 per cent; Facebook is down 19 per cent; LinkedIn is down 36 per cent; Yahoo is down 21 per cent; and Twitter down 40 per cent, points out Somerville.

So are investors right to sell out of tech stocks?

“In general there has been a fairly decent retracement in tech sector, although stocks have recovered a little since,” says Sommerville, adding that traders are getting “very worried” about valuations in the sector.

“You need to differentiate between quality companies and froth,” advises Sommerville, noting that high-earning companies like Apple and Google are actually not that highly valued, while other social media players, such as Facebook and Twitter, have so much “hope value” built into their price.

“A lot of people are trying to suggest that it’s very similar to 2000, but I would suggest it’s very different. Some (tech stocks) are quality companies making serious amounts of money,”

Whatever the outcome, Irish investors who put their money into tech funds over the past few years will certainly have enjoyed the rewards.

Irish Life’s technology index fund has returned almost 18 per cent for investors since last April, followed closely by Zurich Life’s Top Tech 100 fund. The latter has almost 20 per cent invested in Apple and Google, and tracks the performance of the NASDAQ-100 index.

Emerging markets
Best: Standard Life Synergy China Equity (+13.2%)
Worst: Aviva L&P Latin American Equity (-12.9%)

Emerging markets may have had a turbulent time of late, with stocks down by about 16 per cent over the last three years, and global managers pulling money out of the BRICs countries. However, not all emerging markets are equal, and not all funds are either.

Standard Life’s Synergy China fund for example has returned more than 13 per cent over the past 12 months, but its broad based approach may be one of the reasons for its success. The fund does not just invest in Chinese listed companies; it also invests in companies where a “significant proportion” of their revenues or profits come from Chinese operations, or in companies that have significant investments in China. ICBC, Tencent and Bank of China are its top investments and it is heavily invested in financials, with a 22.5 per cent allocation, followed by industrials (15.3%) and consumer services (13.4%).

Funds investing in India (AAM Global India+9.2%) and the Balkans (Danske Invest Transbalkan +4.0%) are also in the black over the 12 months to April 17th, 2014.

Investors in Latin America have not fared as well however. Aviva’s Latin American Equity fund, which invests in a selection of shares quoted in the region, such as Bovespa Index in Brazil and Bolsa Index in Mexico, lost almost 13 per cent in the same period. Its top holdings include Gpo Televisa (6.2%), Telef Brasil (5.3%) and Banco Bradesco (5.9%).

Taking a punt on a basket of emerging market shares may not have paid off either. The BRIC 50 ETF from iShares for example, is down by 5 per cent this year alone, and by 1.2 per cent over the past 12 months. It invests in the 50 largest stocks across Brazil, Russia, India and China. Its largest holding is in China’s Tencent.

Global equity
Best: Irish Life Active 50/50 Global Equity (+22.9%)
Worst: Davy Contrarian (-0.5%)
You could also consider: JP Morgan Global Focus Fund (via Davy Select) +18.3%

A self-proclaimed “high risk” fund, investors in Irish Life’s 50/50 fund will have seen their risk paid off over the past year, as the fund returned 22.9 per cent.

The Active 50/50 fund takes active country positions based on a 50/50 allocation to European equities and to the rest of the world. It aims to pick the best undervalued stocks, and currently has 680 stocks in its portfolio, and its top holdings include Sanofi, Siemens and Bayer. It has 40 per cent of its funds invested in the Eurozone and 14 per cent in the US. It has returned 5 per cent a year since its launch in 2008.

Davy’s Contrarian Fund has not done as well however, losing 0.5 per cent in the same period.

US equity
Best: VAM Funds US Microcap growth (+27%)
Worst: MGI Funds US Equity (+9%)
You could also consider: Franklin US Equity +13.2% (via Rabodirect)

Managed by Driehaus, VAM’s microcap fund invests in companies with market capitalisations generally under $500 million at the time of purchase. The strategy typically maintains a portfolio consisting of 70 to 110 stocks and generally limits individual positions to less than 5 per cent at cost. Its top holdings include Interactive Intelligence Group (2.2%); Callidus Software (1.9%); and Intercept Pharmaceuticals (1.9%). Its largest sectoral allocation is to consumer discretionary (15.8%).

Another option, and available from Rabodirect, is Franklin’s US equity fund. This is up 13 per cent in the year, and its top investments include Apple, Google and General Electric.

But with US markets stumbling, and the general perception being that they are over-valued, could it be the time to sell up? Or buy more at lower prices?

Henry Blodgett, of business news website Business Insider – and of course, the infamous former head of Merrill Lynch’s internet research team at the time of the last bubble – wrote last week that the average stock is now more expensive than it was at the peak of the bubble in 2000. As a result, he’s predicting a “decade or more of lousy returns”.

Government bonds
Best: Zurich Life Long Bond (+8.7%)
Worst: AXA Financial Newton BNY Mellon (-5.7%)

Bonds may have waved goodbye to the hefty returns seen during the sovereign debt crisis, but if you choose wisely, you may still make some decent returns.

Take Zurich’s Life Long bond, which is the pick of the bunch in this category, returning almost 9 per cent in the last 12 months.

It invests mainly in longer-dated bonds issued by Euro zone governments, and has capped investment in corporate bonds at 10 per cent. As of the end of March, it had 1 per cent invested in Irish bonds, with 25 per cent in Italy. But remember the risks of investing in bonds in a low-interest rate environment. Oliver Sinnott, global investment strategist with Davy Stockbrokers, says that bonds should not be considered “risk free”.

He recently wrote that “low rates are curtailing the ability of investors to generate enough income, and if yields rise, investors could see the value of their bonds fall”.

The solution? Stay in short duration bonds; be patient and diversify.

European equity
Best: Prescient Euro zone Equity (+29.4%)
Worst: AXA Financial Allianz RCM Euro Equity Growth (+7.6%)

It’s hard to find a poor performer in European equities over the past 12 months.

Prescient Euro zone Equity is the out-performer in the field, returning almost 30 per cent. The fund manager, which acquired AIB Investment Managers in 2012 is now owned by Davy Stockbrokers.

The aim of the fund is to out-perform the FTSE World Eurobloc index.

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