Naughty and nice investments in 2015

The festive season is well and truly upon us and my childrens' Father Christmas list had been growing at an exponential rate, so I'm rather glad that it has now been 'posted'. On the whole they've been nice this year, so Christmas morning should be fun.  

Speaking of the man in the red and white suit, no 'Santa Rally' has appeared as yet. The FTSE is down more than 4% over the first 10 days of December. With all eyes still on Janet Yellen & Co to see if they will finally raise rates next week, I very much doubt we will see markets do much now.

So rather than trying to guess what the next couple of weeks will mean for investments, let's take a look back and see which funds have been naughty and nice this year.

Top of the good list is Legg Mason IF Japan Equity, which has returned 39.75% this year. There are two other Japanese equity funds in the top ten. Japanese equities have done well for the past three years – since Abe came into power and put 'Abenomics' on the map. Things have stalled recently, but I still think they will do well next year. If we have learned anything in the past few years, it is that quantitative easing is good for equities, and Japan has already pumped ten times as much money into the system as the US – an economy that is three times its size. I expect we will see even more in 2016.

European equity funds are also prevalent in the top ten – Europe is also still on the quantitative easing path, along with smaller companies funds.

Top of the naughty list is MFM Junior Oils Trust, which is down 45.5%. Commodities have had an awful time of it lately and no fewer than seven of the ten worst performing funds of 2015 are in this sector. The other three worst performing funds are all invested in Latin American equities, which is perhaps not too surprising when the biggest market, Brazil, is so reliant on commodities doing well.

Looking ahead to 2016 and I think markets could continue to be volatile. So my area of choice for any new investments is targeted absolute return funds. They act as a good diversifier in a wider portfolio and the good ones do what they set out to do.

When it comes to long/short equity styles in this sector, my favourites are Henderson UK Absolute Return and Smith & Williamson Entreprise.

If you want lower risk, multi-asset, then Church House Tenax Absolute Return Strategies and Premier Defensive Growth are worth a look.

Nice list*:

Fund name % return
Legg Mason IF Japan Equity 39.75
MFM Techinvest Special Situations 33.92
Man GLG Continental European Growth 28.45
Standard Life Investments UK Smaller Companies 26.65
JPM Europe Smaller Companies 25.56
Premier ConBrio Sanford Deland UK Buffettology 25.31
PFS Chelverton UK Equity Growth 24.96
Standard Life Investments European Smaller Companies 24.85
Lindsell Train Japanese Equity 24.81
Baillie Gifford Japanese Smaller Companies 24.25

Naughty list*:

Fund name % return
MFM Junior Oils Trust -45.50
BlackRock GF World Mining -39.60
HSBC GIF Brazil Equity -36.02
Old Mutual JPM Natural Resources -35.93
JPM Natural Resources -35.91
Baring Global Mining -35.20
First State Global Resources -34.69
JPM Brazil Equity -34.21
Schroder ISF Global Energy -31.91
LO Funds Global Energy -31.41

By Darius McDermott, managing director, Chelsea

*Source: FE Analytics, main shareclasses, total returns from 1st December 2015 to 10th December 2015

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius' views are his own and do not constitute financial advice.
Published on 14/12/2015