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Best performing funds and investment trusts since the start of 2021
Funds investing in the UK were some of the top performers in the first quarter of this year as Britain’s fast roll-out of vaccines has tempted some investors to bet on the country’s recovery.
The Investment Association’s UK Smaller Companies sector came top of the table, with returns of 9 per cent in the first three months of the year, while UK Equity Income funds were in third position, up 6.8 per cent, and UK All Companies up 5.8 per cent.
North American smaller companies are also benefiting more than large caps from the expected economic recovery, with the average fund in that sector growing 6.9 per cent.
UK rebound: Funds investing in the UK were some of the top performers in the first quarter
Even UK shopping centres posted a decent quarter of performance, such as Bullring owner Hammerson, which was up 40 per cent, as well as Drum REIT – a real estate investment trust investing in regional commercial property assets – up more than 73 per cent.
However, these are still significantly down on their pre-pandemic levels – and many retail investors are still fleeing the UK stock market, with £1.7billion withdrawn from UK equity funds in January and February, according to Investment Association data.
Laith Khalaf, a financial analyst at AJ Bell, which compiled the research, said: ‘The first quarter of the year saw a resurgence of some areas of the market which have been badly beaten up by the pandemic, as investors look forward to life beyond Covid.
‘Funds investing in the US continued to do well, with the S&P 500 now having broken through the 4,000 mark for the first time.
‘UK equity funds also enjoyed a rare glimpse of the top of the performance tables, thanks in part to the cyclical make-up of the UK stock market, and the reassessment of the prospects for these economically sensitive stocks that has taken place since the arrival of effective vaccines.’
Best and worst performing Investment Association fund sectors in the first quarter
Best performing funds in first quarter of 2021
Funds investing in commodities were some of the best performers, such as Schroder ISF Global Energy, which saw returns of 25 per cent in the first quarter, and Guinness Global Energy, of 20.5 per cent.
Premier Miton UK Smaller Companies, which counts online retailer AO World among its top holdings, delivered a 20.4 per cent return for investors.
Another UK-focused fund – Aberforth UK Smaller Companies, whose top investments include train operator FirstGroup and doorstep lender Provident Financial, saw returns of 19.8 per cent.
| Schroder ISF Global Energy | 25.2% |
| M&G Japan Smaller Companies | 22.9% |
| VT De Lisle America | 22.7% |
| Guinness – Global Energy | 20.5% |
| Premier Miton UK Smaller Companies | 20.4% |
| Aberforth UK Small Companies | 19.8% |
| VT Cape Wrath Focus | 19.3% |
| TM RWC UK Equity Income | 17.1% |
| Barings Global Agriculture | 17.1% |
| Legg Mason IF ClearBridge US Equity | 17% |
| Source: AJ Bell / FE Total return 31/12/2020 to 31/03/2021, sterling denominated funds only |
Top performing investment trusts… but should you consider them for your ISA portfolio?
Some investment trusts have seen whopping returns of over 150 per cent.
All Active Asset Capital Limited, an investment trust which focuses on tech companies, saw returns of almost 185 per cent in the first quarter, while Agronomics, which invests in companies providing meat alternatives, was up almost 136 per cent.
However, some of these top performing investment trusts may not be suitable for the average investor’s Isa.
Some have a very small market cap (less than £10m or in some cases below £5m) ) for an investment fund, and can therefore be subject to volatility – particularly in the gap between the share price and the net asset value.
| All Active Asset Capital Limited | 184.9% |
| Agronomics Limited | 135.8% |
| Drum – Income Plus Reit | 73.6% |
| Drum – Drum Plc | 44.3% |
| Tirupati Graphite PLC | 43.9% |
| Tiger Royalties And Investments PLC | 42.9% |
| Hammerson PLC | 40.8% |
| Seneca Growth Capital VCT PLC | 39.6% |
| New City Investment Managers – Geiger Counter | 38.3% |
| Miton UK MicroCap Trust PLC | 37.1% |
| Source: AJ Bell / FE Total return 31/12/2020 to 31/03/2021 |
‘A lot of these trusts are fairly niche investments and so wouldn’t form the core of a typical ISA portfolio’, said Khalaf.
‘However, experienced investors who are already well-diversified across major markets and sectors and who want to gain additional exposure to specific themes might consider some of these trusts for their ISA, though they must be willing to accept the risks that come with investing in these more specialised areas.’
Drum Income Plus Reit, a real estate investment trust investing in regional commercial property assets, saw returns of 73.6 per cent, while Tirupati Graphite, which focuses on the growing graphite market and has mining operations in Madagascar, delivered 44 per cent returns.
Tiger Royalties and Investments, which invests in natural resource companies globally, provided returns of 42.9 per cent for investors
And the losers…
At the other end of the performance table, fixed income funds had a dismal quarter, as markets priced down bonds in anticipation of heating economies and the probability of rising inflation.
Khalaf says: ‘Of particular concern to UK investors is the big drop in gilt funds, as these are prized by investors seeking a safe haven for their money, and a 7.4% fall in three months doesn’t precisely fit that billing.
‘If risk appetite continues to increase with the global vaccine roll out, and markets start looking forward to potential interest rate rises, recent falls could be the thin end of the wedge for UK government bonds.
‘These assets do still provide some diversification, and they will hold up well if the pandemic or the economy takes a turn for the worse. But based on the high prices and low yields currently on offer in the market, the long term prospects for gilt funds don’t look good.’
This post first appeared on dailymail.co.uk
