Interactive Investor

2016's best and worst investment funds

6th July 2016 10:00

Kyle Caldwell from interactive investor

Gold funds have shone in the first half of 2016, with Investec Global Gold leading the pack of our sister magazine Money Observer's Rated Funds, notching up an eye-catching return of 115%. The gold price has soared to a two-year high, thanks to a spike in demand from both retail and institutional investors.

In the run-up to last month's European Union referendum vote, investors were flocking to the yellow metal, and in the aftermath more piled in amid concerns over the uncertainty a Brexit vote would bring for Britain's economy.

In turn, funds that specialise in buying bullion and gold mining shares have benefited - including the second-best performer, BlackRock World Mining investment trust, which has 23% of its portfolio in gold. The trust, which invests in other precious metals, including copper, silver and diamonds, has gained 59% in the first half of 2016.

Gold and Japan lead

It has, however, been a painful couple of years for gold investors. BlackRock World Mining, for instance, is still down 53% over five years. This is why advisers recommend that investors limit their exposure to specialist gold funds to a small part of a diversified portfolio.

Outside of the gold specialists, the other big winners in the first six months of the year have been Japan funds. In times of uncertainty the Japanese yen is viewed as a safe haven.

International investors view Japan's economy as more robust than those of other Asia nations, which is why in times of uncertainty the yen is a currency where traders park their money.

This has boosted the value of the yen, which has helped to strengthen stockmarket returns for international investors, thereby attracting further interest in the region.

10 best Money Observer Rated Funds in 2016

FundReturn over first six months of 2016 (%)
Investec Global Gold115
BlackRock World Mining IT59
Legg Mason IF Japan Equity47
Murray International23
Baillie Gifford Shin Nippon21
JPM Japan20
M&G Emerging Markets Bond19
Standard Life Investments Emerging Market Debt18
BlackRock Frontiers IT18
Utilico Emerging Markets18
Source: FE Trustnet

UK-based funds lag

At the other end of the performance table, funds that specialise in trying to find gems in the small and mid-cap segments of the UK stockmarket have struggled in the first half of 2016.

Ben Yearsley, investment director of Wealth Club, makes the point that the three worst Investment Association sector performers so far this year have all been UK-focused: UK smaller companies (down 8.8%), UK all companies (down 3%) and UK equity income (down 2.6%).

He notes that this "reflects an anaemic performance from the UK economy", while the UK smaller company sector is at the most risk from Brexit due to its greater domestic bias.

As the table below shows, the worst performer is JPMorgan Mid Cap IT, down 23%, followed by Aberforth Smaller Companies, losing 22%.

Biotech funds, which until September 2015 were on a hot streak of form, have also had a rough time, in part in the face of uncertainty over Hillary Clinton's plans for the sector, which could impact on profits if she is elected as US president in November. Both Axa Framlington Biotech and Biotech Growth Trust are down 18%.

10 worst Money Observer Rated Funds in 2016

FundReturn over first six months of 2016 (%)
JPMorgan Mid Cap IT-23
Aberforth Smaller Companies Trust-22
GVQ Strategic Equity Capital-19
Axa Franlington Biotech-19
Standard Life Investments UK Equity Unconstrained-18
BlackRock Smaller Companies IT-18
Henderson Smaller Companies-18
Biotech Growth Trust-18
Mercantile-18
Standard Life UK Smaller Companies Trust-17
Source: FE Trustnet

  

This article was originally published by our sister magazine Money Observer here.

 

 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.