We have bought two funds from the specialist sector
Sometimes the best returns can be found in this ‘mixed bag’ fund sector, explains our Saltydog investor.
14th December 2020 13:27
by Douglas Chadwick from ii contributor
This content is provided by Saltydog Investor. It is a third-party supplier and not part of interactive investor. It is provided for information only and does not constitute a personal recommendation.
Sometimes the best returns can be found in this ‘mixed bag’ fund sector, explains our Saltydog investor.
This content is provided by Saltydog Investor. It is a third-party supplier and not part of interactive investor. It is provided for information only and does not constitute a personal recommendation.
Last week, Saltydog Investor’s Ocean Liner portfolio invested in a couple of funds from the Investment Association’s specialist sector. The portfolio bought the Ninety One UK Total Return fund and the TB Guinness Global Energy fund.
This sector contains funds that do not fit within the constraints of the mainstream sectors, so they are something of a mixed bag. However, sometimes it is where the best returns can be found.
In our analysis last week, the leading fund in this sector was Ninety One UK Total Return with a four-week return of 29.3%.
| Fund | 4 Week | 12 Week | 26 Week | |||
|---|---|---|---|---|---|---|
| Decile | Return | Decile | Return | Decile | Return | |
| Ninety One UK Total Return | 1 | 29.3% | 1 | 28.0% | 2 | 17.5% |
| TB Guinness Global Energy | 1 | 28.2% | 2 | 14.4% | 10 | -5.2% |
| Invesco Latin America | 1 | 19.6% | 1 | 18.7% | 4 | 13.6% |
| Ninety One Global Energy | 1 | 18.0% | 2 | 14.0% | 10 | 1.9% |
| Liontrust Latin America | 2 | 17.8% | 1 | 15.6% | 4 | 13.8% |
| BlackRock Natural Resources | 2 | 15.8% | 3 | 10.6% | 5 | 10.4% |
| Invesco Emerging European | 2 | 15.7% | 4 | 10.0% | 8 | 5.2% |
| Jupiter Emerging European Opportunities | 2 | 15.1% | 6 | 6.7% | 10 | -1.5% |
| ASI Latin American Equity | 2 | 15.1% | 1 | 16.4% | 3 | 14.9% |
| Data source: Morningstar | ||||||
Ninety One UK Total Return started life in July 1999 as the Investec Capital Accumulator, investing in zero dividend preference shares.
Not only has it changed its name since then, but it has also changed manager and its objective and investment policy. It now aims to “provide capital growth over at least five-year periods”, which makes it sound like a targeted absolute return fund.
It invests mainly in the shares of UK companies, but the volatility of the fund is controlled by a hedging strategy, using FTSE 100 and FTSE 250 derivatives to vary the fund’s level of exposure to the market.
In recent weeks we have seen other funds investing in UK companies doing well and this has been reflected in the performance of the UK All Companies, UK Equity Income, UK Smaller Companies and UK Equity and Bond Income sectors.
The Ninety One UK Total Return fund does not fit into one of these sectors, probably because of its hedging strategy, but will be benefiting from the same underlying economic forces.
Next in the table is the TB Guinness Global Energy fund. The fund’s objective is to “mainly invest in the shares of companies engaged in the oil and gas sector, energy generation and transmission”. These are sectors that have struggled this year because of the coronavirus pandemic.
Earlier in the year, the demand for oil collapsed as the world went into lockdown. Planes stopped flying, ships stopped sailing and factories shut. The price of oil crashed and, in April, briefly fell as low as $20 a barrel.
It has been as high as $85 in the last few years. The price soon started to recover and by June was back above $40. It then levelled off for a few months, but began going back up again at the beginning of November.
Positive news about a vaccine has meant that investors can start to visualise a situation where more people are going back to work, and the wheels of industry can start turning again. Last week, the price of a barrel of Brent crude went back above $50.
- The three regions professional investors see as bright spots in 2021
- Jeff Prestridge: how to keep growing your personal wealth
- ii Super 60 investments: Quality options for your portfolio, rigorously selected by our impartial experts
There has been a lot of focus on alternative ‘clean’ energy and governments around the world are committed to reducing our reliance on fossil fuels. This may one day dramatically reduce demand for oil, but it is not going to happen overnight.
The Ninety One Global Energy fund, which also invests in companies from the oil and gas industries, has moved up to fourth place in the table.
Funds investing in Latin America and Russia have also performed well in recent weeks, partly because of the rising price of oil.
For more information about Saltydog, or to take the two-month free trial, go to www.saltydoginvestor.com.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.