Citywire Selection Review: 10 funds we're adding and dropping

Schroder Corporate Bond has been highly exposed to financials and shorting government bonds that rallied. Although there are no peripheral European bank holdings and manager Adam Cordery (pictured) thinks ‘the strongest banks are being run for bondholders’, we prefer the Invesco Perpetual Corporate Bond fund as a way of playing a recovery in financial bonds and a move to positive sentiment.

The Allianz RCM BRIC Stars fund has suffered during steep market falls and although it is likely to outperform during a strong rally, the choppy nature of this theme has seen the passive iShares FTSE BRIC 50 fare better.

Stock selection and sector allocation have been affecting Blackrock UK Dynamic. Although we have dropped the fund, its manager Mark Lyttleton believes the defensive nature of the core holdings, along with stock picks further down the portfolio, have strong potential for outperformance to return.

The underperformance of Martin Currie North America shows the difficulty in finding managers who can consistently beat the S&P 500 index. This is highlighted by our North America picks now being down to just two funds, one of which is a passive option.

Baring Absolute Return Global Bond was shorting government bonds throughout the whole of last year and concerns on performance contributed to the fund being closed.

Funds under review

We have also placed 11 of our fund selectons under review. Here we have seen underperformance for a longer period than we like which means we might drop them in our next half yearly review. But with markets displaying such irrational swings, it would be wrong to write them off just yet. Many of these have the potential to make a big rebound, making a decision difficult.

Among them is the £1.9 billion JPM Natural Resources fund which is going through a manager change, with Citywire AA-rated Ian Henderson passing on management to Neil Gregson. Henderson’s 20 years at the helm have seen stellar returns in this volatile asset class. We are currently taking a prudent view as the transition takes place and will keep readers updated with our analysis.

Also under review is the £2.2 billion Fidelity Special Situations fund. Manager Sanjeev Shah had the huge task of following Anthony Bolton when he took on the fund in 2008. His value style has fallen on hard times in the past two years. His continued belief that there will be a turnaround in banks has hit performance hard, along with stock specific issues with BSkyB, Yell and more recently Ocado. We have put the portfolio under review, but what remains certain is that if we have even a hint of a recovery this fund will prosper.

The other Selection funds under review are:

• BlackRock UK Absolute Alpha
• Invesco Perpetual Japan
• JPM Asia
• Schroder Monthly High Income
• JPM Emerging Markets
• Sarasin Equisar Global Thematic
• Schroder Income
• Swip Multi-Manager Diversity
• Jupiter Financial Opportunities

Find out more: see the complete list of Citywire Selection funds.