Last tax year’s fund winners – and losers

Which fund provided nearly 50% growth for an early bird ISA last tax year? Which lost a third in value? Rob Morgan reveals the top and bottom ten performing funds over the 2015/16 tax year.

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  1. Rob Morgan

Investing successfully over the past year has been far from straightforward. As a whole markets made little ground, but at times exhibited a high level of volatility. It was easy to be wrong footed. However, for those taking out an early-bird ISA at the start of last tax year there were pockets of opportunity, and a number of funds ended up posting impressive returns.

The best performer was Legg Mason Japan Equity, rising 48.6% despite turgid performance across the IA Japan sector as a whole. The manager, Hideo Shiozumi, focuses on growth companies positioned to benefit from the development of the “New Japan” – firms able to exploit opportunities relating to Japan’s advanced elderly society, changes in consumer spending and lifestyles, and a broadening internet-based economy. The resulting high-conviction portfolio of small and medium-sized companies bears little resemblance to the index or its peers. Faring less well in the same sector, however, was Neptune Japan Opportunities, which is in the bottom ten. The manager’s strategy of hedging the yen has added value at times in the past, but during this period the fund fell more than its peers whose exposure to the Japanese currency helped offset market losses.

A number of UK smaller company funds performed well over the tax year. Although MI Chelverton UK Equity Growth is in the IA UK All Companies sector, it is strongly orientated towards small and medium-sized companies and some fine stock picking delivered a 21.4% return. Similarly, TB Amati Smaller Companies fared well and the emerging growth focus of MFM Techinvest Special Situations provided strong performance.

Meanwhile, an emphasis on high-quality global companies exhibiting resilient growth propelled Fundsmith Equity into the top ten; a fine achievement for a mainly larger company portfolio. Man GLG Continental European also thrived owing to its concentration on companies with strong competitive positions that performed well in spite of a tough environment in Europe.

Aviva Asia Pacific Property picked up dramatically from the second half of 2015. However dealing in the fund is suspended following the decision to close after its two largest investors advised of their intentions to redeem their holdings. The fund remains in “wind up” mode, gradually realising investments in physical property with the aim of maximising sale values.

Elsewhere, while wider resources funds struggled, Ruffer Gold and MFM Junior Gold staged a strong recovery in the first quarter of 2016 on the back of a resurgent gold price; sufficient to make a late push into the top ten. Finally, in the IA Targeted Absolute Return sector, City Financial Absolute Equity had an exceptional year, assisted by some strong stock picking among smaller companies and some short positions (which benefit from falling prices) in mining companies. Investors should note this fund can be among the more volatile in its sector.

The poorest-performing fund list for the period contains less variety. Over the course of the tax year energy funds had a difficult time, and despite a resurgent oil price in recent months they represent three of the top five fallers. Natural resources and commodity funds also performed badly. Commodity prices, with the exception of gold, collapsed further in the early part of 2016 with oil reaching multi year lows; although a sharp turnaround from February provided some relief as global growth concerns subsided.

Funds investing in emerging markets and, in particular, China followed a similar pattern, and following several years of very strong performance the biotech sector came under pressure as investor sentiment waned and concerns about the sustainability of drug pricing took their toll.

Although investors should be aware that past performance is not a reliable indicator of future results, here are the top and bottom ten funds and sectors for the 2015/16 tax year in full:

Top 10 funds

Bottom 10 funds

Data assumes investing on the first day of the 2015/16 tax year and remaining invested until the last day. Onshore retail funds only. Past performance is not a reliable indicator of future returns. Figures are shown on a total return basis, bid to bid price with net income reinvested; Source: FE Analytics.

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