ii Super 60 review: Q3 2021

Find out how interactive investor’s rated funds performed in the three months up to the end of September.

ii Super 60 fund selections

Japan led the way among developed markets, with strong momentum in September lifting Japanese share price gains over the third quarter. 

US stocks delivered a small gain, mainly driven by strong earnings in August. However, concerns over growth and inflation dampened the US market in September.

The performance of the energy sector helped the UK equity market, which was just behind that of the US. Eurozone equities traded sideways, dragged by the consumer discretionary sector, despite the strong return in Energy and Information Technology.

Driven by a significant sell-off in China, both Asia ex Japan equities and emerging market equities declined sharply during the period, as concerns over the credit risk of property group Evergrande (SEHK:3333) spread globally.

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In the third quarter, value shares outperformed growth shares, as energy and commodities advanced.

Super 60 performance

Considering the market dynamics for the period, our Super 60 performed in-line with our expectations. In the third quarter, 77.3% delivered positive returns. 

Of the 49 actively managed portfolios, 38 delivered positive returns, while 33 outperformed relevant benchmarks, and 30 gained above their relevant peer average. Holdings in the Japanese market led the gain during the period, while those specialising in the Asia Pacific and emerging markets fell. 

Over a five-year period, of 48 actively managed portfolios, 47 delivered positive returns (with BMO Commercial Property (LSE:BCPT) the outlier with a small loss), while 33 outperformed relevant benchmarks, and 38 outperformed their wider fund or trust sector. 

Baillie Gifford Shin Nippon (LSE:BGS) investment trust, which favours small Japanese companies, returned 7.6%. It was followed by FTF Martin Currie Japan Equity Fund, with a gain of 7.5%. Next, BMO Commercial Property, which has a large exposure to the UK retail segment, returned 7.5% for the period and is up over 20% in one year. If its discount continues to shrink, there could still be opportunities for the share price to catch its net asset value (NAV). 

Scottish Mortgage (LSE:SMT) investment trust was also in the top five of the Super 60, with a return of 7.3%. 

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Marlborough Multi-Cap Growth fund, which invests in a portfolio of leading companies from across the UK market and has a bias towards-mid-cap names, rose 6.7%. Its top three sectors are consumer discretionary, industrials and technology. 

Funds specialising in Asia, the emerging markets and China flopped in the third quarter. Fidelity China Special (LSE:FCSS) investment trust, which is overweight China A-Shares and the Chinese tech sector, dropped 24%, reflecting the dampened sentiment in the Chinese market caused by regulatory change. The Fidelity Asia fund declined 8.8% due to its majority position in the Greater China region and 40% in the information technology sector. 

A large weighting to the Asia-Pacific region negatively impacted Murray International (LSE:MYI), which retreated by 6.7%. Elsewhere, Fidelity Index Emerging Markets fund, which tracks the performance of the MSCI Emerging Markets Index, dropped 5.6%. 

Finally, the Guinness Asian Equity Income fund was weighed down by having a third of its assets in Chinese equities. The fund lost 5.3%.

Top five ii Super 60 funds in Q3 2021

Source: Morningstar Total returns in GBP.

Bottom five ii Super 60 funds in Q3 2021

Source: Morningstar Total returns in GBP.

Over a five-year period, portfolios that invest in smaller companies or have a bias to mid-cap names have doubled, or even tripled. This exhibits the investment thesis that, over the long run, smaller companies tend to outperform larger companies.  

Bonds, especially government bonds, have been weak compared to the performance of equites, a reflection of a high-risk appetite in the market over the period. 

Elsewhere, Vanguard FTSE UK Equity Income Index is among the worst five performers , reflecting the poor sentiment towards UK equities over that period, which was dominated by Brexit uncertainty and the Covid-19 pandemic. 

Since the lifting of lockdown, BMO Commercial Property Trust has been reclaiming losses suffered and closing the gap between the share price and NAV.

Top five ii Super 60 funds for a five-year period

Bottom five ii Super 60 funds for a five-year period

Most-bought Super 60 funds in Q3 2021

Most-sold Super 60 funds in Q3 2021

Changes to the ii Super 60 list (under review/developments)

The Artemis Monthly Distribution fund was put under review in September following the recent announcement that its co-manager James Foster is planning to retire at the end of 2021.  

Super 60 videos in Q3

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