Nine months have now passed since the announcement of effective Covid-19 vaccines and the election of a new US president. Yet the fund winners from this period haven’t necessarily acted in conventional fashion.
The events of last November saw equity investors set their sights on economic recovery and ushered in the ‘reflation trade’, premised on US stimulus plans and the gradual reopening of the global economy.
But the resultant rally in value stocks has petered out for the moment, as renewed concerns over growth are accompanied by a US tech stock resurgence and another move downwards for bond yields.
So for all the talk of a market rotation – both away from tech, and away from the US in favour of other regions - the Nasdaq index has again beaten all other major global indices over the past nine months.
There is another twist in the tale, however. For many multi-asset managers, being underweight the US over this period has proven the right call after all.
Below are some of the top performers since last November, and the asset allocation strategies driving their portfolios.
Chelsea Managed funds
Chelsea Financial Services’ multi-asset range has outperformed with a negligible US weighting: just 3.8 per cent of its Balanced Growth fund is held in US equity products.
The ratings agency is among those that use global equity funds to bump up its US exposure. But it has also sought out different routes, such as taking exposure to private markets via the Chrysalis Investments trust run by Jupiter and the Schiehallion trust.
Chelsea has also maintained a mix of value and growth funds throughout the period, helping it navigate the swings seen since last November.
The firm’s Balanced Growth and Monthly Income funds are top decile in their respective Mixed Investment sectors over the period and over three years.
Momentum Diversified duo
Momentum Global Investment Management bought multi-asset manager Seneca last October. That deal brought together two distinct teams of portfolio managers who nonetheless shared a then-contrarian preference: a dislike of US shares.
The former Seneca funds, now renamed Momentum Diversified Growth and Momentum Diversified Income, have made good use of that stance, rising to the top quartile of the Mixed Asset sectors over one and three years.
Both suffered steep drawdowns at the nadir of the coronavirus crisis last spring, but have since rallied strongly courtesy of their value tilts. The funds combine direct UK equity positions with collectives investing overseas and relatively elevated cash positions.
Axa Distribution funds
An old-fashioned distribution approach has paid off for Axa IM’s Matthew Huddart and Jamie Forbes-Wilson in recent months. The funds typically combine direct UK stock-picking with sovereign bonds – in the latter case, a focus on index-linked UK issuance was of benefit as inflation concerns mounted at the start of 2021.
In an ESG-conscious age, it’s little surprise that the range’s Ethical Distribution fund has proven the standout performer over the period. But it’s also a sign of the times that the underlying yields offered by such funds remain much lower than historic standards.
