What were the best funds and sectors in 2017?

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China and UK smaller companies are among the funds that have led performance in 2017, while absolute return continues to have a poor run and index linked gilt funds disappointed.

Polar Capital UK Absolute Equity was topping performance for the year, returning 47.6 per cent to the period ended yesterday, while Old Mutual UK Smaller Companies Focus returned 47 per cent and Baillie Gifford Greater China returned 46.9 per cent.

Architas investment director Adrian Lowcock says investors shrugged off China’s rising debt levels in 2017, while its technology sector contributed to strong performance, landing the sector in top place with returns of 31.9 per cent.

UK Smaller Companies slipped into second, while Technology & Telecommunications sector was third.

Lowcock says the strong performance from UK Smaller Companies is testament to the stockpicking ability of fund managers as the Numis Smaller Cos ex IC index delivered 14.8 per cent, much lower than 23.9 per cent for the sector.

Top 10 IA Sectors

IA Sector

Percentage Return

China/Greater China

31.9

UK Smaller Companies

23.9

Technology & Telecommunications

22.5

Asia Pacific Excluding Japan

21.9

European Smaller Companies

21.8

Japanese Smaller Companies

21.3

Asia Pacific Including Japan

20.7

Global Emerging Markets

20.0

Europe Excluding UK

16.0

IA Japan

15.4

Source:  FE Trustnet, 31st December 2016 to 4th December 2017. Total Return in Pounds Sterling

Top 10 funds

Fund

Percentage Return

Polar Capital UK Absolute Equity

47.6

Old Mutual UK Smaller Companies Focus

47

Baillie Gifford Greater China

46.9

NB China Equity

45.2

Barclays Global Access Pacific Rim (ex-Japan)

41.8

Invesco PRC Equity

39.7

Elite Webb Capital Smaller Companies Income & Growth

39.4

Legg Mason IF Martin Currie China

38.7

JPM Asia Growth

38.4

Baillie Gifford Pacific

38.3

Source:  FE Trustnet, 31st December 2016 to 4th December 2017. Total Return in Pounds Sterling

While corporate and strategic bond funds delivered a healthy mid-single digit return, index linked gilt funds disappointed.

“This is because the rise in inflation in the UK was widely expected following the slump in the pound in the summer of 2016 as the country voted to leave the EU,” Lowcock says. “As such, index linked gilts moved last year in anticipation of the rise of inflation as investors sought protection.”

The absolute return sector continues to have a poor run of form, Lowcock says. “The sector has struggled to call markets accurately for several years as macro themes, in particularly political changes, have not translated into market performance the way generally expected.”

Lowcock says while commodity prices have stabilised and improved throughout the year, companies in the sector are still adjusting to prices that are lower than a few years ago.

Bottom IA Sectors

IA Sector

Percentage Return

UK Gilts

0.7

UK Index Linked Gilts

0.7

Global Bonds

1.8

Targeted Absolute Return

3.3

Global Emerging Markets Bond

3.5

Personal Pensions

3.9

Mixed Investment 35% Shares

4.0

Sterling Corporate Bond

4.2

Sterling Strategic Bond

4.9

Property

5.1

Source:  FE Trustnet, 31st December 2016 to 4th December 2017. Total Return in Pounds Sterling

Bottom Ten funds

Fund

Percentage Return

VT Craigshannoch Multi Strategy

-23.9

Manek Growth

-23.6

HC Charteris Gold & Precious Metals

-20.6

Schroder ISF Global Energy

-19.6

Smith & Williamson Global Gold & Resources

-17.1

Investec Global Energy

-16.2

GS North America Energy & Energy Infrastructure Equity Portfolio

-15.3

MFM Junior Gold

-14.2

Thesis TM Sanditon UK Select

-12.9

Guinness Global Energy

-12.4

Source:  FE Trustnet, 31st December 2016 to 4th December 2017. Total Return in Pounds Sterling