Highest and lowest returning funds
Highest returning funds last quarter
The highest performing fund in our Recommended Funds list over the fourth quarter was Legg Mason IF Royce US Smaller Companies, which rose 19.9%. This is exactly the type of fund we would expect to benefit from President-elect Trump’s anticipated business-friendly, US-first policies. Smaller US companies are likely to outperform their larger counterparts as they tend to be more local and better able to withstand potential import tariffs, as well as being less exposed to a stronger US dollar. Being overweight in industrials and materials were major contributors to the fund’s performance as Trump’s commitment to infrastructure spending looks set to reinvigorate these sectors. Financial companies’ earnings also stand to benefit from broadly higher interest rates, and this fund has a 13.7% weighting in the sector.
|TD Recommended Funds providing the highest returns in Q4|
|Legg Mason IF Royce Smaller Companies||View report||Invest now|
|Man GLG Japan CoreAlpha||View report||Invest now|
|Guinness Global Energy||View report||Invest now|
|JPM US Equity Income||View report||Invest now|
|H2O MultiReturns||View report||Invest now|
The second best performing fund over the period was Man GLG Japan CoreAlpha. The fund maintained its momentum from the last quarter with a return of 15.2%. Japanese equities continued their rally over the quarter. The fund’s value strategy is starting to pay off as investor favouritism towards the relative safety of growth is gradually changing. Fund manager Stephen Harker continues to find real value in automobiles, with Toyota and Honda two of the top five holdings. Despite a fourth quarter rally, the pound’s recent woes against a strengthening yen has helped drive the fund’s performance over 2016.
Other funds which did well during the quarter included Guinness Global Energy, which benefited from a rise in the oil price after OPEC and non-OPEC members agreed to a production cut, and H2O Multireturns, which was up 13% to put the fund just into positive territory over the year. The fund has a natural contrarian bias in its investment strategy and is not afraid to make bets when appropriate. Its position in Greek sovereign debt stands as testament to this philosophy with bailed-out Greece heading the Eurozone yields table in 2016.
JPM US Equity Income performed strongly for much the same reasons as the Legg Mason fund detailed above, with US equities in general responding positively to the prospect of a Trump administration.
TD Recommended Funds - Highest and lowest returns in Q4 2016
Past performance is not a reliable indicator of future results
Source: Morningstar Direct as at 31 December 2016.
Lowest returning funds last quarter
BlackRock Gold & General was the lowest returning fund in our Recommended Funds list over the quarter, falling 13.8% as gold was negatively impacted by an increased appetite in investment risk. Nevertheless, the fund was still the top performer for 2016 as a whole, up 80% over the year.
|TD Recommended Funds providing the lowest returns in Q4|
|Royal London Uk Government Bond||View report||Invest now|
|Newton Real Return A||View report||Invest now|
|L&G All Stocks Linked Gilt Index||View report||Invest now|
|Veritas Asian A GBP||View report||Invest now|
|BlackRock Gold & General||View report||Invest now|
Two UK government bond funds were in the bottom five performers: L&G All Stocks Index Linked Gilt Index and Royal London UK Government Bond. We have seen inflation begin to rise in the UK, which could lead to a rise in interest and could curtail the long-term rally in government bonds.
Other funds which underperformed were Veritas Asian and Newton Real Return. Veritas Asian fell 5.8%, largely due to holdings in areas which were out of favour. While it was down over the quarter, the Newton fund has delivered 3.4% over the course of 2016, in line with its objective of a positive absolute return.
The information we provide in this Investment Outlook are opinions provided by TD Direct Investing or one of its partners on whether to buy a specific investment. None of the opinions we provide are a personal recommendation.
Investors should be aware that the value of investments can fall as well as rise, you may get back less than you invested. Past performance is not a reliable indicator of future returns. If you are unsure about the suitability of a particular investment you should speak to a suitably qualified financial adviser.