Standard Life’s £40m UK equity recovery fund has been the worst-performing fund across the IMA sectors over the last three months, according to data from Morningstar.
Recent volatility in the markets has affected the short-term performance of a number of funds. Financials have been badly affected through the equity sell-off of the past few weeks, as investors become increasingly risk-averse in response to global events.
Standard Life’s UK equity recovery fund fell by 25.5 per cent between May 24 and August 24. JP Morgan’s £117.7m global financials fund is the second-worst performer, falling by 24.3 per cent over the same period.
Third on the list is the £19.6m CF Richmond core fund, which fell by 23.92 per cent, followed by the £52.5m CF junior oils trust which took a 23.7 per cent hit.
Sector Investment Managers chief executive Angelos Damaskos, who manages the junior oils trust, says: “Medium to smaller-sized companies have suffered the worst during the sell-off because of the risk aversion of investors. The mandate of the fund constrains us to these types of stocks.”
Damaskos (pictured) says he has sold down the fund’s 30 per cent holding in cash and bonds to 14 per cent over the last few months in favour of cheap equities. He expects the stocks will re-rate when markets stabilise.
Standard Life’s £436.5m UK equity unconstrained fund is the fifth-worst performer, down by 23.4 per cent. Manager Ed Legget says global growth expectation has fallen as a result of sovereign risk in Europe and policy issues in the US.
He says: “I have been overweight industrials, which has hurt particularly in the last few weeks. Industrials have de-rated by 25 to 30 per cent over a four-week time period.”
In terms of industrials, he remains committed to the sector. He says: “Corporate capex and emerging markets is a better place to be than developed market consumer over the next two to three years.”
Legget has added 2 per cent to UK banks to make up a 5.5 per cent position over the last couple of months.
He says: “It is riskier not to own banking stocks. They have got the potential to go up a long way if people get a little bit more confident about life.”
Legget says the Standard Life UK equity recovery fund’s focus on recovery stocks and its high exposure to financials has hurt performance over the last four to six weeks. He says: “Recovery stocks are not as popular in times of uncertainty, where people are less optimistic about the prospect of recovery.”
The sixth-worst performer is the Cavendish European fund, followed by the Digital Stars Europe ex UK fund, Jupiter China, JPM Europe smaller companies and the Ignis European growth fund in 10th spot.
A spokeswoman for Cavendish Asset Management says: “Cavendish takes a stock picking approach looking for value in our investments and, as such, the European fund has had some exposure to underperforming markets. We have recently re-aligned our position to reflect these volatile times selling a number of stocks and re-defining our exposure to the emerging economies of Europe. We continue to believe that there is value in Europe and are confident that the portfolio contains attractively priced stocks which offer the prospect of outperformance moving forward.”
Premier Wealth Management managing director Adrian Shandley says: “Global financials have underperformed because of the banks but the managers of the other funds must have been taking speculative smaller companies positions.”