Posted by Admin on Feb 27, 2014 in Finance
FE Trustnet reveals which fund managers won big when their predictions for this year were proved correct.
The majority of industry experts say that instead of trying to predict the future, everyday investors should instead keep a well diversified portfolio that isnât dependent on one area of the market doing well. However, for anyone with adequate time, resources and most crucially experience, making a top-down macro call can be extremely beneficial. Here, we look at the managers who made big calls at the start of 2013 and won big. Equities â full speed ahead As recently as mid-2012, Fidelity Special Situations' Sanjeev Shah had been heavily criticised for his three-year underperformance, primarily caused by the managerâs big bet on banks. However, when banks came roaring back in the second half of 2012, Shahâs underperformance was largely forgotten, with the fund making big gains. In spite of his second-half surge, in December last year Shah said we were in the early stages of a bull market in equities, and predicted cyclical areas of the market would lead the rally in 2013. His forecast has largely been proved correct, with domestic companies leading the charge this year. This call has helped Fidelity Special Situations achieve top quartile returns over the last 12 months. Performance of fund vs sector and index over 1yrSource: FE Analytics Shahâs predecessor, legendary investor Anthony Bolton, also said equities would float to the surface from the end of last year. "I believe 2013 will be the year when these tailwinds swing behind equities in general and that markets will be driven upwards by an expansion of valuation multiples rather than by strong earnings growth or upgrades of earnings forecasts," Bolton said at the time. The Fidelity managers werenât the only ones to be bullish about the prospects for markets in 2013. A slew of managers predicted the FTSE would rise above 6,500 this year and indeed, the bulls were right. The likes of FE Alpha Manager Chris Burvill, who runs the Henderson Cautious Managed fund, and Premierâs Mike Jennings, both predicted that the FTSE would soar above 6,500 points in 2013. Ross Henderson, manager of the EFM OPM UK Equity fund, was even more bullish â predicting a high of 7,000 points by the end of the year. The managers were certainly in the right ballpark. From 6,000 points at the start of 2013, the FTSE 100 index rose around 14 per cent to a high of 6,840 in May, though it has come off slightly since then. It total return terms, at it's peak the index was up 19.01 per cent. Year-to-date performance of indexSource: FE Analytics Still, at 6,634 at the time of writing, investors who listened to the bulls 12 months ago have certainly been rewarded. Stop being defensive Among those who benefited from Shahâs strong performance were fund of funds managers Robin McDonald and Marcus Brookes, who run the Cazenove Multi Manager Diversity portfolio. They explained at the back end of 2012 that they were backing more bullish managers such as Shah over the likes of Neil Woodford, who is more defensively positioned, because valuations were far more attractive in the cyclical end of the market. Woodfordâs Invesco Perpetual High Income fund has had a good year in its own right with returns of just over 20 per cent, but Shahâs Fidelity Special Sits portfolio turned out to be the better bet. Japanâs dawn wonât be a false one In February this year, FE Alpha Manager Steve Russell (pictured) told FE Trustnet that the Japanese rally was for real this time, after decades of false dawns. At the time, Russell and co-manager Hamish Baillie had 21 per cent of their Ruffer Investment Company invested in Japan â their biggest regional position overall. No other trust in the IT Global Growth sector had even close to this amount. This contrarian bet benefited their portfolio enormously, particularly in the early stage of the year. Performance of indices in 2013Source: FE Analytics In recent months, Russell and Baillie have scaled back their Japan weighting somewhat in favour of UK equities. Japanese equities now make up 17 per cent of the trust while UK equities have shifted up to 20 per cent of the portfolio. Even earlier, in July 2012, Ruth Nash and Scott McGlashen, managers of the JOHCM Japan fund, predicted small and medium sized companies would experience the strongest surge in what they called the âinevitableâ rally in Japanese equities. True to their word, small and mid caps have led the rally, with the IMA Japanese Smaller Companies sector beating the IMA Japan sector by almost 8 percentage points. Performance of sectors in 2013Source: FE Analytics At the end of last year, Chelsea Financialâs Darius McDermott (pictured), also correctly predicted Japan would rally in 2013. He is sticking by his bet for 2014 as well. In a recent FE Trustnet article, McDermott said the political and economic situation in Japan was different this time, and that the rally could be sustained into next year. Emerging markets will fall to the bottom of the heap After markets corrected over the summer, the UK, US, Europe and Japan all bounced back from their lows. However, emerging markets have continued to perform poorly on an absolute basis, creating an ever wider divergence between them and western economies. Performance of indices in 2013Source: FE Analytics Given the decade of dominance that preceded it, few expected this underperformance, but FE Alpha Manager Angus Tulloch called the slowdown in emerging markets in May when he said the golden era was at an end. Tulloch (pictured) and First Stateâs head of emerging markets Jonathan Asante, said globalisation was partly to blame for the diminishing opportunity set in emerging markets, and warned that investors in emerging market tracker funds were likely to be disappointed for years to come. Investment house ING was also bearish about emerging markets this year, so much so that in March it slashed its weighting to equities, bonds and currency markets in the sector. ING cited ineffective macro policy, disappointing corporate earnings and stuttering investor demand as reasons to be negative on the region. Gold no longer glitters Gold has certainly fallen from grace over the last few years, after reaching an all-time high of more than $1,900 per troy ounce in mid-2011. While many investors have clung to their gold hordes, Ecclesiasticalâs Robin Hepworth, warned in March this year that gold had lost its charm and sold out of the precious metal in November 2012. Performance of gold in 2013Source: FE Analytics Hepworthâs move proved to be an astute one. Gold has done nothing but tumble in 2013, hitting a fresh low of $1,207.70 per troy ounce at the time of writing.
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