TD Recommended Funds - Highest and lowest returning funds

Highest returning funds last quarter

The best performing fund in our Recommended Funds list over the third quarter was Man GLG Japan CoreAlpha, which returned 20.9%. This is partly a reflection of the fact Japanese equities was one of the top performing sectors during the quarter. The fund’s overweight in wholesale trade, oil & coal and mining, and an underweight to machinery, were positive contributors to performance with Tokyo Broadcasting System the top performing stock during September.

TD Recommended Funds providing the highest returns in Q3
Man GLG Japan CoreAlpha Profl Inc D View report Invest now
Henderson Global Technology I Acc View report Invest now
Liontrust UK Smaller Companies I Inc View report Invest now
Old Mutual Eurp Ex UK Smlr Coms R £ Acc View report Invest now
Schroder Tokyo Z Acc View report Invest now

The second best performing fund over the quarter was Henderson Global Technology, which benefited from IT being the highest returning sector. The fund’s manager says the global technology sector is benefiting from the growing dominance of cloud infrastructure; it has the potential to be one of the most disruptive trends in technology over the next 20 years and is one of the investment themes being followed within the fund.

The other funds making up the top five were Liontrust UK Smaller Companies, Old Mutual Europe ex UK Smaller Companies and another Japan fund, Schroder Tokyo. The philosophy behind the Liontrust fund is to identify companies which have an “economic advantage”, which competitors struggle to reproduce, in the shape of intellectual property, strong distribution channels and significant recurring business.

By focusing on the smallest companies in the European market, the Old Mutual fund aims to exploit inefficiencies while still minimising risk. This and the Liontrust fund also demonstrate the advantages that can be gained from moving down the market capitalisation scale.

Schroder Tokyo benefited in particular from its holding in Nintendo, which saw its share price rise dramatically after the launch of its Pokemon Go game for mobile devices.

Past performance is not a reliable indicator of future results

TD Recommended Funds - Highest and lowest returns in Q3 2016

Past performance is not a reliable indicator of future results
Source: Morningstar Direct as at 30 September 2016.

Lowest returning funds last quarter

L&G UK Property Feeder was the lowest returning fund over the quarter. The fund was impacted by the heavy levels of selling across the commercial property sector and resulting liquidity issues, as a result of which it introduced a fair value adjustment. This adjustment has now been removed and despite these issues the fund still managed to post a positive return over the period.

TD Recommended Funds providing the lowest returns in Q3
Henderson UK Absolute Return A Acc View report Invest now
H2O MultiReturns View report Invest now
Newton Real Return A View report Invest now
Kames UK Equity Absolute Return A Acc View report Invest now
L&G UK Property Feeder I Dist View report Invest now

Three of the five lowest returning funds over the quarter are absolute return funds: Henderson UK Absolute Return, Newton Real Return and Kames UK Equity Absolute Return. These returns are actually what we would expect from absolute return funds in a rising market – below that of the FTSE All Share but still in positive territory.

H2O MultiReturns was up 1.5% over the quarter, and remains the worst performer in the Recommended Funds list year-to-date. However we have stressed before that this fund’s performance profile can be something of a rollercoaster in the short term, but over the long term we remain confident that it can outperform.

Past performance is not a reliable indicator of future results

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Investors should be aware that the value of investments can fall as well as rise, you may get back less than you invested. If you are unsure about the suitability of a particular investment you should speak to a suitably qualified financial adviser.