At the start of last year we identified some key themes for 2012 that we expected to dominate the investment landscape and picked out the funds we thought were best positioned to benefit from them. Looking back at the performance of the nine funds we singled out we are pleased to report that they posted an average return of 8.44 per cent, overall beating both the FTSE All-Share and FTSE 100. Five out of our nine funds beat both those indices by considerable margins. If you strip out the three property funds, the average return for the remaining six funds is even better at 13.62 per cent.
PERFORMANCE OF 2012 FUND TIPS
| Fund tipped | Return 6 January 2012 to 31 December 2012 (%) | Total expense ratio (%) |
| Threadneedle Amer Sm Cos Ret Net Acc | 6.91 | 1.69 |
| Threadneedle Amer Ret Net GBP Acc | 5.28 | 1.68 |
Marlborough Multi Cap Income A Inc | 23.01 | 0.9 |
IP UK Strategic Income Inc | 12.91 | 1.69 |
JPM Em Mkts Small Cap A (dist)-GBP | 15.79 | 1.9 |
First State Global Emerg Mkts Ldrs A GBP | 17.84 | 1.58 |
L&G UK Property R Inc | 1.49 | 1.43 |
Threadneedle UK Property Trust Inc | -1.55 | 1.65 |
Aviva Investors Asia Pacific Property A | -5.75 | 2.15 |
Average | 8.44 | |
FTSE 100 | 4.39* | |
FTSE All-Share | 6.78* |
Source: Morningstar and *Datastream, as at 31 December 2012.
Below is a round up of the themes together with the funds that we chose to play them out.
We recommended that investors Stay with the US in 2012 for reasons including strong company balance sheets, healthy dividends, good emerging markets exposure and strong competitive advantages. We chose Threadneedle American Smaller Companies as an aggressive choice because the fund had a good track record and experienced managers, and should do well over the long-term.
Threadneedle American was our suggestion for more cautious investors because it is run by the same team and has a good long-term track record but should be less volatile as it is focused on larger companies which should particularly benefit from some of the factors set out above.
While we feel we were right to recommend the US, both the Threadneedle funds posted disappointing performance for 2012 compared to the S&P 500 index and other actively managed funds in their peer groups.
We did much better with our Yearning for Yield theme in which we suggested exposure to growing dividend streams from companies with robust cash flows, via Marlborough Multi Cap Income for aggressive investors. This fund only launched in 2011 but holds mid and small-caps as well as larger companies, and is run by Giles Hargreave who has excelled in running smaller-caps funds such IC Top 100 Fund Marlborough UK Micro-Cap Growth (read our tip). Marlborough Multi Cap Income has got off to a good start putting it among the top 10 performers of nearly 100 UK equity income funds over 2012.
Our cautious choice was Invesco Perpetual UK Strategic Income which focuses on companies with reliable cash flow, strong balance sheets and sustainable dividend growth, typically operating across a spread of countries. It is run by well regarded manager Mark Barnett and over three and five years is among the top 25 per cent of UK equity income funds.
Our Goodbye G7, hello G20 theme was also a success. It was based on the view that while not immune to global problems the long-term case for emerging markets remains intact, and we are in a two-speed world where emerging markets are likely to deliver better economic and stock market growth than developed ones. For aggressive investors we suggested Luxembourg domiciled fund JPMorgan Emerging Market Small Cap which had performed strongly and is well diversified by holding and geography. The fund is among the top 25 per cent of its offshore peer group over 2012, and also three years.
For more cautious investors we suggested IC Top 100 Fund First State Global Emerging Market Leaders, which over longer periods consistently sits among the top five Global Emerging Markets funds. Even over a short period such as 2012 it did not fail to deliver, coming in among the top 25 per cent of funds in its sector.
Where our fund tips came unstuck was on our 'Back to commercial property' theme. Only one of our chosen property funds made a positive return in 2012. L&G UK Property Trust managed to turn in 1.49 per cent, though was still behind many of its sector peers coming in at 27 out of around 40 funds. It was also a disappointing year for Threadneedle UK Property which came in not far from the bottom, although over the longer term both of these funds have done better and are run by well regarded teams.
Our choice for more adventurous investors, Aviva Asia Pacific Property was nearly the worst performer in its sector, but again has done much better over three years.
View the 2013 fund tips of the year.
