Markets have been hit by negative sentiment in the eurozone, the potential for a hard-landing in China and signs of economic softening in America. Yet “it is still higher-risk funds that top the performance tables over a three-year period, thanks to the rallying market during the 2009 and 2010 QE-fuelled bull run”, says Joshua Ausden on FE Trustnet. With the Bank of England approving another £50bn bout of money printing, some funds could benefit further.
One is the £404m Standard Life UK Equity Unconstrained fund, with returns of 90% over three years compared to the IMA UK All Companies sector at 48%. That puts it in the top ten in its sector.
Managed by Ed Legget, it has around 60% of its portfolio in “economically sensitive, cyclical companies operating in areas of structural growth”, says Mark Dampier in Money Marketing. This includes industrial and media firms where Legget sees opportunity to “buy good-quality businesses on low p/es of around eight times with yields of 4%-6%”.
A smaller part of the portfolio is in recovery stocks in depressed areas such as banks, house builders and property firms – including Barclays and Lloyds. As such, it is definitely a fund for optimists. But in a relief rally it could do well.
“Look back at periods when the market has had a risk-on appetite and you will see this is often one of the top performing funds,” points out Dampier. Fund analyst Richard Troue agrees. It is “invested in cyclical companies, or those that are more dependent on the economy doing well”, he tells FE Trustnet. “It tends to be somewhere near the top (of the fund tables) during big spikes in performance.”
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Standard Life Unconstrained top ten holdings
| Name of holding | % of assets |
|---|---|
| International Personal Finance | 5.1 |
| DS Smith | 5.1 |
| Bodycote | 3.6 |
| Galliford Try | 3.6 |
| GKN | 3.4 |
| Afren | 3.3 |
| Lupus Capital | 3.3 |
| Howden Joinery Group | 3.2 |
| Weir Group | 3.1 |
| Yule Catto & Co | 2.9 |