ii Super 60 performance review: Q2 2023
11th July 2023 13:32
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Discover how interactive investor’s rated funds performed in the three months to the end of June.
The performance of the Super 60 funds over Q2 clearly reflected market conditions with US equities leading the way and strong returns from Japan in sterling terms. Weakness was again seen from a number of closed-end funds where sentiment in the form of widening discounts often caused added pain.
The leading performer on the Super 60 investment ideas list over Q2 was Premier Miton US Opportunitieswith a positive return of 7.6%. This is an actively managed product that is run out of London by longstanding managers Nick Ford and Hugh Grieves. The portfolio is multi-cap and fairly concentrated, with a focus on higher-quality, sustainable stocks. Defensive growth and quality did well in the US over the quarter and these factors are part of the investment process here. Attribution versus the mainstream S&P 500 index also highlights strong positive stock selection in industrials and healthcare which further boosted returns.
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Vanguard US Equity Index, a passive fund that tracks the S&P Total Market Index, also saw strong returns with the competitive ongoing charge of just 10 basis points ensuring that most of this flowed through to investors. Jupiter Merian North American Equity, another American equity fund, took third place on the top performers list. This fund invests across the market-cap scale using a quant approach that draws on five distinct factors, including a market-dynamics component that considers momentum trends, short-term signals and dynamic valuation, which enables the model to dynamically shift between value and quality to reflect changing market dynamics. Over the quarter, the fund produced good positive returns, reflecting the relative performance of the US market. It was slightly behind large-cap US benchmarks due to its allocation down the market-cap scale, but there were positives in terms of stock selection in energy and industrials.
The next fund on the outperformers’ list was Man GLG Continental European Growth. This fund also featured last quarter and continues to be managed by the highly experienced Rory Powe, who is key to the strategy. It is a concentrated, high-quality growth fund that has shown persistent overweights to the consumer discretionary and IT sectors. The concentrated nature can result in significant returns from stock selection versus the mainstream MSCI Europe ex-UK Index and this has been the case over the past quarter with strong positive returns from stock selection in healthcare and consumer discretionary, including names such as Abcam (NASDAQ:ABCM), Ferrari NV (MTA:RACE) and Delivery Hero SE (XETRA:DHER).
HSBC Japan Index is the fifth top performer, reflecting the strength of the FTSE Japan Index, which this product passively tracks. The market has seen strong returns over the quarter, particularly in large-caps that have benefited from the weakness in the yen and renewed interest from foreign investors.
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At the other end of the list was Balanced Commercial Property (LSE:BCPT). The trust was one of the weaker performers in Q1, and in Q2 the cause was again the move in the discount which widened significantly despite the underlying NAV showing a slight increase (the market return was -18.5% over the quarter). The trust provides exposure to prime UK commercial property with a heavy bias towards central London and Southeast England and has been subject to negative views on the future prospects for commercial property in the face of domestic economic uncertainty and variable data on the future demand for office space. The discount now stands at slightly more extreme levels than peers and we may see management moving to reduce this through further buybacks if that persists.
Fidelity China Special Situations (LSE:FCSS) has seen a slight widening of its discount but the NAV return has been particularly weak at almost -13%. The trust has been managed by Dale Nicholls since April 2014 and benefits from an analyst team researching Asian equities that is over 50 strong with a significant presence in China. The manager seeks undervalued companies that have the potential to deliver over the longer term through good industry dynamics and competitive advantages. Versus the MSCI China benchmark, there is a clear bias to mid- and small-cap companies where the manager believes opportunities exist due to lack of coverage. At the sector level there is often an overweight to industrials and IT. Unlisted companies are permitted up to 15% and gearing is typically around 20%. Over the quarter, the gearing has exacerbated the weakness seen from the China market and mid-cap stocks in particular.
The next two funds on the list of bottom performers in the Super 60 have significant exposure to UK smaller companies. Both have seen a slight widening of their discounts and in NAV terms have underperformed the flat to slightly negative returns from UK small and mid-cap indices. Diverse Income Trust (LSE:DIVI) is managed by Gervais Williams and Martin Turner, who both have significant experience in the small-cap space. The aim of this strategy is to provide investors with an attractive and growing income, together with capital growth over the longer term. To achieve this the managers invest across the market-cap spectrum. Within this, there is significant exposure to smaller-cap stocks and to the AIM market, where the managers have held an allocation of over 35% in recent years. AIM stocks were weak over the quarter, while attribution versus the FTSE All-Share Index shows weak stock selection in energy and financials, which further dented performance.
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Henderson Smaller Companies (LSE:HSL) is focused on identifying quality growth companies and holding them over the long term. Individual names are assessed using the team’s 4Ms process that covers: Model (competitive advantages and SWOT analysis); Management (quality of leadership); Money (company financials) and Momentum (potential for persistent positive earnings surprises). There is a focus on liquidity and this results in a slight bias towards mid-caps versus most small-cap indices, while there is also a clear bias to growth factors and significant exposure to AIM-listed stocks. AIM stocks were weak over the quarter, while attribution versus the Morningstar UK Small Cap TME Index shows weakness in stock selection across communication services, consumer discretionary and financials.
The fifth worst-performing fund on the list was Baillie Gifford Shin Nippon (LSE:BGS). Despite the large-cap part of the Japanese market performing well, some of the drivers were not relevant for the smaller end of the market which underperformed. Particular weakness was seen in small-cap growth stocks and this Baillie Gifford fund has a strong growth bias. Its investment approach follows the more extreme end of the house process and focuses on identifying high earnings and sales growth and holding them for the long term to benefit from compounding growth. This style and an element of gearing largely explains the performance of the trust over the quarter.
Top five Super 60 funds in Q2 2023
| Group/Investment | 3 month | 1 year | 3 years | 5 years |
| Premier Miton US Opportunities B Acc | 7.61 | 9.95 | 39.64 | 71.15 |
| Vanguard U.S. Eq Idx £ Acc | 5.34 | 13.21 | 41.71 | 74.12 |
| Jupiter Merian North Amer Eq I GBP Acc | 4.98 | 9.64 | 43.70 | 63.50 |
| Man GLG Continental Eurp Gr Prf Acc C | 4.59 | 27.10 | 15.62 | 37.50 |
| HSBC Japan Index C Acc | 4.29 | 13.13 | 14.24 | 19.59 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.
Bottom five Super 60 funds in Q2 2023
| Group/Investment | 3 month | 1 year | 3 years | 5 years |
| Balanced Commercial Property Ord (LSE:BCPT) | -18.47 | -37.24 | 21.25 | -44.63 |
| Fidelity China Special Ord (LSE:FCSS) | -14.58 | -25.16 | -20.97 | -6.41 |
| Diverse Income Trust Ord (LSE:DIVI) | -9.17 | -11.00 | 8.52 | -5.86 |
| Henderson Smaller Companies Ord (LSE:HSL) | -9.11 | -6.06 | 2.66 | -13.38 |
| Baillie Gifford Shin Nippon Ord (LSE:BGS) | -7.97 | -0.84 | -26.97 | -27.50 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.
Top five Super 60 funds for a five-year period
| Group/Investment | 3 Mmonth | 1year | 3 years | 5 years |
| Vanguard U.S. Eq Idx £ Acc | 5.34 | 13.21 | 41.71 | 74.12 |
| Premier Miton US Opportunities B Acc | 7.61 | 9.95 | 39.64 | 71.15 |
| Jupiter Merian North Amer Eq I GBP Acc | 4.98 | 9.64 | 43.70 | 63.50 |
| Fundsmith Equity I Acc | 1.49 | 13.82 | 25.87 | 62.87 |
| iShares Core MSCI World ETF USD Acc GBP (LSE:SWDA) | 3.95 | 13.27 | 37.54 | 60.93 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.
Bottom five Super 60 funds for a five-year period
| Group/Investment | 3 month | 1 year | 3 years | 5 years |
| Balanced Commercial Property Ord (LSE:BCPT) | -18.47 | -37.24 | 21.25 | -44.63 |
| Baillie Gifford Shin Nippon Ord (LSE:BGS) | -7.97 | -0.84 | -26.97 | -27.50 |
| TR Property Ord (LSE:TRY) | -1.49 | -24.49 | -10.16 | -23.68 |
| Vanguard UK Govt Bd Idx £ Dist | -6.21 | -16.61 | -34.54 | -22.32 |
| Lindsell Train Japanese Eq B GBP Qut Dis | -4.98 | -1.11 | -24.01 | -16.32 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.
Most-bought Super 60 funds in Q2 2023
| Scottish Mortgage (LSE:SMT) |
| Fundsmith Equity I Acc |
| City of London (LSE:CTY) |
| Vanguard LifeStrategy 80% Equity |
| F&C Investment Trust (LSE:FCIT) |
Most-sold Super 60 funds in Q2 2023
| Scottish Mortgage (LSE:SMT) |
| Fundsmith Equity I Acc |
| Vanguard LifeStrategy 80% Equity |
| City of London (LSE:CTY) |
| Vanguard LifeStrategy 60% Equity |
Changes to the Super 60 list (under review/developments)
No changes.
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The Super 60 investments list is selected and managed by our independent research partner Morningstar and reviewed by our in-house investment experts to help narrow down the wide choice of available investment products. We believe it represents a set of high-quality choices, across different asset classes, regions, and investment types.
However, you should note that the selection of Super 60 investments list is not a ‘personal recommendation’. This means we have not assessed your investment knowledge, your financial situation (including your ability to bear losses), your investment objectives, your risk tolerance, or your sustainability preferences.
You should ensure that any investment decisions you make are suitable for your personal circumstances, and if you are unsure about the suitability of a particular investment or think you need a personal recommendation, you should speak to a suitably qualified financial adviser.
The past performance of an investment is not a reliable indicator of future results, and ii does not guarantee or predict the future performance of the Super 60 investments list as a whole or the constituent investments.
Risk Warning(s)
The value of your investments may go down as well as up. You may not get back all the money that you invest.
Investing in emerging markets involves different risks from developed markets, in many cases the risks are greater.
The value of international investments is affected by currency fluctuations which might reduce their value in sterling.
Disclosure(s)
All funds listed are the Accumulation version of the fund, where available, where any income generated within the fund is reinvested automatically. Income versions of these funds may also be available for investors looking for income generated to be paid directly into their account.
Annual performance can be found on the factsheet of each fund, trust or ETF. Simply click on the asset’s name and then the performance tab.
Any changes to the Super 60 investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Review.
Details of all Super 60 recommendations issued by ii during the previous 12-month period can be found here.
ii adheres to a strict code of conduct. Members of ii staff may have holdings in one or more Super 60 investments, which could create a conflict of interest. Any member of staff involved in the development of research about any financial instrument in which they have an interest are required to disclose such interest to ii. We will at all times consider whether such interest impairs the objectivity of the recommendation.
In addition, staff involved in the production of the Super 60 investments list are subject to a personal account dealing restriction. This prevents them from placing a transaction in the specified instrument(s) for five working days before and after an investment is included or amended and made public within the Super 60 investments list. This is to avoid personal interests conflicting with the interests of investors in the Super 60 investments.