Funds giving above average returns in a Low Interest Economy !
On March 5, 2009, the Bank of England cut interest rates from 5 per cent to 0.5 per cent – their lowest level since the central bank was founded in 1694.
The move sent the FTSE spiralling down to around 3500, its lowest level in six years, which would later be seen as the darkest point of the global financial crisis for UK markets.
June marks 100 months since the introduction of emergency interest rates, and although memories of the financial crisis still linger, the FTSE has more than doubled since its 2009 lows.
Few could have therefore predicted that we would now be in an even lower interest environment, with the base rate at just 0.25 per cent and showing no signs of budging.
June marks 100 months since the introduction of emergency interest rates, and although memories of the financial crisis still linger, the FTSE has more than doubled since its 2009 lows
Number-crunching from Chelsea Financial Services has revealed that anyone who kept cash savings for the past 100 months would have had the worst returns in history.
Keeping £1,000 in an account paying the base rate since March 5, 2009, would give just £1,039.80 – a return of less than £40.
It would be worth £1,501.68 if rates had stayed at 5 per cent, meaning cash savers have lost out on more than £460.
But those who chose to invest their £1,000 in UK equity funds or UK equity income funds would have seen their pot grow to £3,081.72 or £2,998.62 respectively.
If that wasn't impressive enough, the top-ten performing UK equity funds over the past 100 months have all added at least £4,000 to an initial £1,000 investment.
The best performer has been the MFM Slater Growth fund , run by star manager Mark Slater ( The Son of Jim Slater the Author of the Book "The Zulu Principle" ), which has returned 552.95 per cent over the period. So a £1,000 investment made on the day interest rates were cut would now total £6,529.50.
Another strong performer has been the SVM UK Opportunities fund, run by Neil Veitch and Craig Jeruzal, which returned 472.8 per cent, turning £1,000 into £5,727.76.
Other winners include the Standard Life Investment UK Equity Unconstrained fund, which has returned 468.35 per cent, the TM Cavendish Opportunities fund, which has made 462.9 per cent, and the Unicorn UK Income fund, up 447.4 per cent.
Those who chose to invest their £1,000 in UK equity funds or UK equity income funds would have seen their pot grow to £3,081.72 or £2,998.62 respectively
Juliet Schooling Latter, research director at Chelsea Financial Services, said anyone investing rather than saving in 2009 was getting in at the bottom of the market – which is impossible to predict but gives maximum returns.
With the FTSE now at around 7500, she said she would be more cautious of investing a lot of money in the UK market, adding: 'While it could continue to rise in the short term, a correction of some sort would not surprise me.
'In these conditions, I would favour funds investing in UK equities that aim to make money when markets rise but also when they fall.'
She believes the two with most potential are the Henderson UK Absolute Return fund, managed by Ben Wallace and Luke Newman, and the Smith & Williamson Enterprise fund, run by Rupert Fleming and Mark Boucher.
Absolute return funds, meaning they aim to make investors money in the long run regardless of market conditions.
Both can take long and short positions, so they can bet against firms and ride out difficult markets.
In terms of traditional UK equity funds, Schooling Latter recommends the Threadneedle UK Extended Alpha fund, managed by Chris Kinder.
She said: 'This is a more core fund that has the ability to short stocks if the manager believes it will add value.'
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