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The trusts to buy and hold in 2011
by James Carthew on Jan 20, 2011 at 00:01
Looking at Numis’s statistics to assess the best and worst performing investment companies of 2010, it became obvious that Baillie Gifford had another good year.
On a price return basis, the best global growth fund was their Mid Wynd , up over 60%. Half of this came from discount narrowing, which is not repeatable with the fund now trading at a premium (this may even reverse a bit in 2011). The rest came from net asset value (NAV) performance – the second best in the global growth sector after its stablemate Scottish Mortgage .
Monks and Edinburgh Worldwide also delivered respectable NAV growth, ranking seventh and ninth of the 26 global growth funds Numis covers. The best of the global funds focused on income was another Baillie Gifford fund; Scottish American’s share’s rose by over 40% as it moved to trade around asset value, outperforming Murray International on an NAV basis.
Baillie Gifford Shin Nippon and Baillie Gifford Japan topped their respective sub-sectors. Only Pacific Horizon disappointed, narrowly failing to beat its benchmark over the year and trailing the likes of Aberdeen New Dawn . This good performance follows on from decent numbers in 2009 as the funds bounced back from a dismal 2008.
Baillie Gifford’s house style is focused on stock picking. The degree of portfolio concentration varies from fund to fund but the managers aren’t afraid to leave large index constituents out of their portfolios.
Sometimes this means they have large positions in stocks many investors won’t have heard of. I have criticised them in the past for having too many generalist funds. They have tried to differentiate them; each has a different manager and risk profile.
There is a house bias to growth stocks and a common overweight of emerging markets, with a current emphasis on China and Brazil. Relative to other global growth funds they are much lighter in the UK.
This may be a consensus view but it is rarely reflected in portfolios to the extent of Baillie Gifford’s. Therefore they are vulnerable to sudden adverse swings in sentiment towards emerging markets, which is what caught them out in 2008. They tend to use more gearing than the average fund, which exacerbated the problem. By sticking with their convictions and riding out the setback, they have prospered since.
This year may bring another short-term crisis in emerging markets. Stubborn Chinese inflation has already prompted rate rises and, if unchecked, could generate political unrest. Tensions between North and South Korea, and the gyrations they caused in the South’s markets, might partly explain the weaker second-half performance of Pacific Horizon . India’s equity markets look overvalued (but this is an area where the funds are generally light) and Brazil is fretting about its currency.
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- Mid Wynd International (Ordinary Share)
- Scottish Mortgage (Ordinary Share)
- Monks (Ordinary Share)
- Edinburgh Worldwide (Ordinary Share)
- Scottish American (Ordinary Share)
- Murray International (Ordinary Share)
- Baillie Gifford Shin Nippon (Ordinary Share)
- Baillie Gifford Japan (Ordinary Share)
- Pacific Horizon (Ordinary Share)
- Aberdeen New Dawn (Ordinary Share)
Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.
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J.P. Morgan Elect on investment growth, income and cash. More information on J.P. Morgan investment trusts.