Growth and income portfolios: Leaders and laggards July 2013
With a view to helping investors who like to make their own decisions, Money Observer, in conjunction with Interactive Investor, designed a series of model investment portfolios at the beginning of 2012, some for those who want to grow their capital and others for investors seeking to generate income.
Here, Helen Pridham takes a look at some of the best and worst-performing holdings and explains the reasons behind their respective performances.
For our quarterly review of the model porfolios' performance, read: Income portfolios excel as investors flee risk.
Leading income holding: Unicorn Income
The Unicorn Income fund, which appears in two of our higher-risk income portfolios, has been one of our strongest-performing holdings since inception. It is up 4.2% over the past quarter. It recently won a Money Observer Fund Award for its consistent performance thanks to the skills of its manager John McClure, founder of Unicorn Asset Management.
He focuses on small, higher-yielding companies operating in niche areas or selling specialist products or services. The fund has a low turnover as he aims to hold stocks for the long term. In recent years McClure has been particularly keen on businesses with significant overseas exposure.
Leading growth holding: Artemis Strategic Assets
A holding of our medium risk, 5-9 and 10-14 year growth portfolios, Artemis Strategic Assets has at last come into its own. Its aim is to preserve capital and achieve longer-term positive returns under most market conditions, but it is something which its manager William Littlewood has not always found particularly easy.
During the last quarter, though, it returned 2.1%, when most other holdings were falling in value. It invests in a mixture of assets, including gold, shares, bonds and currencies. Recently its equity holdings have performed well and its currency exposure has also benefited from the weakness of the Australian dollar.
Lagging income holding: Newton Asian Income
Newton Asian Income had an unusually poor quarter, losing 7.3% of its value. It is held in the higher-risk growing income portfolio. Asian markets were hit by investor concerns about China's growth as well as general worries about the end to quantitative easing in the US.
However, the fund's manager, Jason Pidcock, remains optimistic about the future for the area in general and the companies he holds in particular. He sees most potential in south-east Asia and is also heavily invested in Australia.
We believe this is only a temporary setback for the fund, which achieved a hat-trick in Money Observer's 2013 Fund Awards, and we think is still a good holding for the long term.
Lagging growth holding: Templeton Emerging Markets Investment Trust
Templeton Emerging Markets Investment Trust, managed by Mark Mobius, also suffered from concerns about China and quantitative easing. Investors became more risk-averse and the trust's discount to net asset value also widened as a result of the sell-off, causing a loss of 12.6% over the period.
At 26.8%, Hong Kong and China holdings make up the largest part of the portfolio, so it was particularly vulnerable to the deterioration in sentiment. However, we believe the trust, which is held in two of our higher-risk growth portfolios, will recover and provide useful gains for investors over the longer term.
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