The best and worst-performing funds and sectors this millennium

It’s the end of an era. After writing for pretty much every edition of Fund Strategy since it launched – including the pilot – the brand is to focus on its online proposition moving forward.

My regular review of the various categories of the Investment Association’s sectors has proved to be a rewarding exercise for me. I hope it has been useful for you.

Looking back over the best part of 17 years it is remarkable how much has happened in the investment world. In the year 2000 we were still feeling the turmoil brought about by the dramatic rise – and subsequent fall – of so-called TMT stocks. Technology, media and telecoms were must-have portfolio components back then. Vodafone once accounted for nearly 15 per cent of the value of the Footsie index. In 2000 this index experienced its most dramatic period of change, with companies entering and exiting regularly as the fortunes of TMT stocks waxed and waned.

Then we had the financial crisis of 2008, preceded by a banking collapse the previous year. Markets were volatile and many managers were caught out by events.

UK equity income managers, in particular, were hit by the banks’ decision to suspend dividend payments – a problem exacerbated when another favourite of these portfolios, BP, followed suit in the wake of the Gulf of Mexico disaster.

Meanwhile, interest rates on both sides of the Atlantic fell to record lows as that great financial experiment known as QE commenced.

What did all this mean for the fortunes of the individual sectors and managers?

Unsurprisingly, China and Asia-Pacific ex Japan led the performance tables, but UK and European smaller company funds also performed well. Most sectors would have doubled or trebled investors’ money, allowing for reinvested net income, and none delivered negative returns. It did come as a surprise, though, to find TMT at the foot of the tables.

As far as individual funds are concerned, top prize must go to Aberdeen’s Emerging Markets Equity fund, which has returned over 1,000 per cent since Fund Strategy launched, though the Marlborough Special Situations fund deserves recognition too. Hugh Young and Giles Hargreave have been among the leading stars of the investment community during this period.

Other funds worthy of mention that do not come within the top five listed here include BlackRock Gold & General, a fund with which I was closely associated when it was launched. Julian Baring managed it at James Capel, where I headed retail marketing from the outset, before the fund and its manager were sold on. Julian ceased to manage it many years before Fund Strategy was launched and sadly is no longer with us.

There are some eminent names among the laggards over this period, and eight funds actually delivered negative returns, even allowing for reinvested income. Jayesh Manek, who runs the bottom fund, is probably less well-known, but he did win a fantasy manager competition run by a leading Sunday newspaper two years running in the 1990s. Unfortunately, this early promise did not come to fruition.

As it happens, the period covers pretty much a third of the time I have been involved in the investment industry. And one thing I have learned over the half century-plus I have worked for financial firms is that change is inevitable, so be adaptable when working in an evolving environment is the best advice I can give anyone engaged in the business of constructing portfolios for private investors. If anything, the pace of change is quickening and this trend seems set to continue as technology makes its mark.

I wish all those in this fine industry of ours the very best of luck for the future.

The numbers

1023.9% Return of the Aberdeen Emerging Markets Equity fund since October 2000

501.4% Performance of the China/Greater China sector since Fund Strategy launched

11.4% Average return of the Technology & Telecoms sector since Fund Strategy launched

73.1% Loss made by the Manek Growth fund since October 2000

Key takeaway

Fund Strategy’s life as a printed magazine has encompassed some remarkable events for the investment world. The deflation of the technology bubble was continuing as it launched. The greatest global financial crisis in my not inconsiderable experience started just seven years after the publication hit the newsstands. And we’ve had elections a-plenty, with often unexpected and surprising results, a couple of referendums here at home and the inauguration of a president in the US who threatens to extend uncertainty with his somewhat bumbling administration. If there is one key takeaway for investment advisers, it must be that nothing in portfolio management can be taken for granted.