The early bird Isa investor catches the worm – and creams off the best profits – if they selected from the Moneyspider.com Top Ten Isa Funds
6 August 2012
EARLY BIRD ISA INVESTORS looking for a steer on what funds to go for in the 2012-2013 tax year will see a dramatic change in the profile of top performing funds over the past 12 months compared to those which have topped the Moneyspider.com top 10 investment funds of the past three years.
In the 12 months to 28 July 2012, the out and out winners in the Moneyspider.com top 10 investment funds are dominated by gilt, specialist and bond funds, reflecting the direction of the UK and global economy over a volatile year for stock market investment.
But investors who bought funds three years ago will have been well rewarded if they held UK Smaller companies funds, which dominate the three year top 10 Moneyspider.com performers.
Over the past year, it is investors who went for the AXA Framlington Biotech Fund who have come out ahead of the pack in a period when many equities based funds have been losing money hand over fist.
A £5,000 investment in AXA’s flagship fund has returned a useful £6,429, while investors who opted for one of the many gilt based funds populating the Moneyspider.com top 10 chart have also done well.
AXA’s Sterling Long Gilt Fund holds the number two position, returning £6,310 in one year to 28 July 2012 – although those investors who hold Vanguard’s Long Gilt Fund will also be pleased with its return of £6,295 on a £5,000 initial investment.
“But look how the picture has changed over the last three years,” said Moneyspider.com’s Tony Ahearne.
“It is the UK Smaller Companies funds which dominate the picture, and over a 36 month period, from 28 July 2009 to 28July 2012, investors who have selected the best funds will have doubled their money.
“MFM Slater Growth for example has turned a £5,000 investment into £10,998, while other star funds such as Cazenove, Liontrust and Fidelity Smaller UK Companies’ funds have all effectively doubled their investors’ money by turning £5,000 into at least £10,000,” added Ahearne.
Three year performance easily outstrips five year performance, according to Moneyspider.com data.
Many of the top ten funds over the last five years have been outgunned by rivals on a significantly shorter time frame, suggesting that the old maxim – the longer you hold an investment, the bigger it will grow – is no longer necessarily true.
“As our tables (see attached Excel file) show, gilt based investment funds have had a good run over the past year, but it is fair to say that there are currently huge fears over the health of the European bond fund market – some of which are justified given the precarious economic situations in countries like Greece, Portugal and Spain,” said Tony Ahearne.
“Many investors remain keen on bond based funds, however the attractiveness of overseas global bonds for investors will largely depend on how long interest rates stay low and when inflationary pressures emerge.
“Investors choosing to invest in overseas government bonds need to be aware that they are going to be exposed to currency risk, which can be more volatile than the bonds themselves.
“Principally however, investors should never put all their eggs in one basket, and the core Moneyspider.com mantra is choose the right fund manager, but make sure you are in the right fund.
“By maintaining a beady eye on performance not only of the fund and sector you’re in but also funds and sectors from across the whole market, Moneyspider.com investors can see where the real profits are to be made.”
“The key to a successful portfolio is balance: emerging markets funds for example are currently providing some of the most attractive returns of all the equity investment fund sectors, but none feature in our 12 month top ten fund charts,” said Ahearne.
“They tend to be a slower burn, and most investors are relatively under-exposed to emerging market funds – but around 5 per cent exposure within a portfolio, preferably through a well diversified investment fund should secure gains over the longer term,” said Ahearne.