The best and indeed worst performing funds of the last tax-year

7th April 2014


With investors’ minds now on how to use their new ISA allowance Rob Morgan, pension and investments analyst at brokerage Charles Stanley Direct looks back on what areas did well – and not so well – in the last tax year…

I have always been struck by the “seasonality” of ISA contributions. Investors often tend to delay putting money into their ISA until the last few weeks – or even days – of the tax year. However, there are also the “early birds”, those who take the opportunity to use their ISA allowance as soon as it is available.

This is often a superior strategy. The chosen investments have an extra year in the market, or more cautious investors can drip feed their money into investments month by month reducing the risk of market timing.

This year will be somewhat different for ISA investors. An allowance of £11,880 is available now, and on the 1st July this increases to £15,000. For those keen to get started now, though, it is interesting to look back on what areas did well (and not so well) over last tax year. Past performance is not a guide to the future, but it should give some context regarding the recent relative performance of different asset classes and areas of the market.

As the tables below show, it was an outstanding period for UK smaller companies funds, and these dominate the top 10. The sector as a whole was up 33.5% over the period. European equities also performed exceptionally well. The European economy has been something of a laggard, but recovery now seems to have taken hold, and the market correctly anticipated this. It was a strong period for developed markets generally, with broader UK and US sectors also posting good returns.

However, returns were not so good in the East. The Japanese sectors were muted and broader Asia funds suffered. Emerging markets funds were the weakest performers, though, particularly those exposed to Latin America and Russia. Investors in these higher risk areas have had to contend with a number of fears: the tapering of quantitative easing, slowing growth, currency weakness and political unrest, all of which weighed heavily. However, it has left valuations looking more appealing so it could merit a closer look for higher risk investors able to withstand the inevitable volatility.

It was also difficult year for bonds, and in particular gilts which suffered as interest rate expectations began to pick up. However, many high yield and strategic bonds funds delivered respectable performance.

The worst performers over the period, notwithstanding a substantial bounce since the start of 2014, were gold mining funds. This high risk specialist area receded as the price of gold fell, making many existing and planned projects unviable. There were also falls in broader mining and commodities funds, though not as severe. Interestingly, some fund managers are now starting to look at larger mining companies for dividend potential.

Although investors should be aware that past performance is not an indicator of future performance, here are the top and bottom 10 funds and sectors over the course of last tax year in full:

Top 10 funds:

CF Miton UK Smaller Companies 69.3%

R&M UK Equity Long Term Recovery 55.7%

CF Wood Street Microcap Investment 55.0%

R&M UK Equity Smaller Companies 53.6%

Investec UK Smaller Companies 50.4%

Elite Webb Capital Smaller Companies Income & Growth 50.3%

Franklin UK Smaller Companies 45.5%

Schroder European Alpha Income 45.0%

FF&P Small Cap UK Equity 44.9%

Unicorn UK Smaller Companies 44.4%

Bottom 10 funds:

Baillie Gifford Emerging Markets Bond -21.8%

Aberdeen Latin American Equity -23.6%

First State Latin America -25.6%

Smith & Williamson Global Gold & Resources -25.8%

Investec Global Gold -28.4%

BlackRock Gold & General -29.5%

WAY Charteris Gold Portfolio Elite -32.9%

SF Webb Capital Smaller Companies Gold -41.9%

MFM Junior Gold -41.9%

CF Ruffer Baker Steel Gold -45.5%

Top 10 sectors

IMA UK Smaller Companies 33.5%

IMA European Smaller Companies 27.2%

IMA Technology & Telecoms 20.9%

IMA Europe Excluding UK 19.7%

IMA Europe Including UK 18.8%

IMA North American Smaller Companies 18.6%

IMA UK All Companies 18.1%

IMA UK Equity Income 17.2%

IMA North America 14.2%

IMA UK Equity & Bond Income 10.0%

Bottom 10 sectors

IMA Sterling Corporate Bond 0.5%

IMA Short Term Money Market 0.1%

IMA Money Market -0.1%

IMA Japan -1.1%

IMA Asia Pacific Excluding Japan -2.2%

IMA Asia Pacific Including Japan -3.6%

IMA UK Gilts -4.6%

IMA Global Bonds -4.9%

IMA Global Emerging Markets -7.4%

IMA Index – Linked Gilts -7.35%

Source for all data: FE Analytics 08/04/2013 to 04/04/2014


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