Top funds keep home fires burning

Percentage by which the top-performing fund, Quilter Global Income, was overweight or underweight in January compared with the geographical weightings of the FTSE World Index.
High-beta, smaller companies and emerging market funds dominated returns in January as the bull run that epitomised the last three quarters of 2003 continued into 2004. However, a statement from the US Federal Open Market Committee that interest rates may need to rise earlier than expected caused a rise in the dollar and thus a fall in many UK-domiciled fund returns by the end of the month. The result was an average return in January of just 0.94%.
Global Growth funds suffered somewhat as their relatively high US equity weighting of 35.3% pushed the sector down the IMA ranking table. The sector gained 0.71% for January, underperforming all non small-cap regions except North America itself, which gained a mere 0.34%, and Japan, which was the poorest performing equity sector with a 0.02% return. Japanese Smaller Companies, by contrast, was the second best-performing fund grouping with 3.96% growth, beaten only by UK Smaller Companies with a 6.37% gain.
The best-performing fund was the Quilter Global Income fund with 5.49% growth. The fund holds UK-listed investment trusts and its strong performance comes from its high weighting in the UK (78.0%). The average UK exposure for the top five performing funds in the Lipper survey was 51.04%, whereas the sector index weighting was 21.7%.
Of the poor-performing funds, First State Global Opportunities fell 1.11%, placing it 192nd of 199 funds in the sector. The fund’s 55.0% weighting in Far East ex Japan failed to have a positive impact. First State Global Growth also suffered, with a fall of 0.91% due to its overweight position in North America (44.60% against the sector average of 35.3%).
The largest allocation movement was seen from CS Multi Manager Constellation, which withdrew 32.90% from the UK market; 12.90% was placed into Continental Europe. Artemis Global Growth moved 14.84% from North America and 4.23% from the UK and put 12.86% into Continental Europe. Gartmore moved 13.96% and 12.34% respectively from its Global Focus and Global Opportunities funds out of North America, placing an additional 3.44% into Europe in the Global Focus fund and 5.25% into the UK in the Global Opportunities fund.
Over the past months, we have seen a slight movement away from the UK and North American markets. This may be due partly to the upturn in smaller company/high-beta stocks or some Asian market performance. While this indicates that sentiment remains positive, 2004’s focus will be on whether the global economic recovery can be maintained.