Ian Cowie: winners and losers in my ‘forever fund’ in fourth quarter

23rd December 2021 09:04

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Our columnist reports on his personal experience as a DIY investor over the past three months.

Global stock markets suffered wild mood swings in 2021 with febrile fluctuations in share prices right up to Christmas week. Bulls and bears, or optimists and pessimists, put their money where their mouth is in a great debate about whether economies will recover from the coronavirus soon or slip back into recession.

So it was no surprise to see the 20 investment trusts in my ‘forever fund’ sharply divided between winners and losers. Several suffered - or enjoyed - double-digit losses or gains during the final three months of this year.

Without further ado - apart from thanks to independent statisticians Morningstar - here they are; my best and worst investment trusts in the final quarter of 2021. Sad to say, the standout stinker was a former top 10 holding by value, the Japanese smaller companies specialist, Baillie Gifford Shin Nippon (LSE:BGS), which fell another 14% in the fourth quarter to end the year (to 20 December), with its share price 18% lower than it began.

As if to demonstrate that not every acorn grows into an oak - or that sometimes investors hoping for massive returns must settle for a measly bonsai - JPMorgan Japan Small Cap Growth & Income (LSE:JSGI) was not much better, shrinking 11% in the fourth quarter and falling 17% over the year. The ‘Land of the Rising Sun’ remains slumped in another false dawn with its main market index trading a quarter below levels briefly seen more than 30 years ago.

Rising tensions with North Korea, plus China’s increasingly assertive superpower have compounded Japan’s long-standing demographic problems - too many wrinklies, not enough kids and immigrants. October’s election of a new prime minister, when Fumio Kishida replaced Yoshihide Suga after little more than a year in office, has done nothing to ease fears that Covid is boosting debt to unsustainable levels.

Within weeks, Japan’s budget is expected to announce a record deficit. Mr Kishida risks repeating Mr Suga’s brief tenure as leader, heralding a return to the "revolving door" era when Tokyo saw six prime ministers in as many years running up to 2012.

Other fourth-quarter losers for my ‘forever fund’ included my first-ever ten-bagger, JPMorgan Indian (LSE:JII), which fell by 6.6% in the three months to Monday this week, but remains 12% up over the year. Schroder UK Public Private (LSE:SUPP) slipped 6.3% over the quarter, but rose 7.5% over the year. My fifth failure was BlackRock Latin American (LSE:BRLA), 4.3% lower in the fourth quarter and 13% down in 2021, with last Sunday’s election of a communist former student leader in Chile showing, once again, there is no situation so bad that political interference cannot make it worse.

On a brighter note, my 4 November purchase of shares in Canadian General Investments (LSE:CGI) got off to a good start, ending the fourth quarter 11% higher than they began, while Vietnam Enterprise (LSE:VEIL) advanced by 8.3% during the quarter and 38% over the year. Long-term top 10 holding by value, Polar Capital Technology (LSE:PCT), was not far behind with 8.2% gains on the quarter and 14% over the year.

My ‘favourite five’ in the fourth quarter were joined by Gore Street Energy Storage Fund (LSE:GSF) - up 7.8% and 18% for the year, followed by JPMorgan US Smaller Companies (LSE:JUSC), with total returns of 6.1% and 12%.

Nick Britton, head of intermediary communications at the Association of Investment Companies (AIC), told me: “The fourth quarter of the year saw the average investment company return 1.8%, with fears about the Omicron variant weighing on markets towards the end of the period.

“Japanese and Indian equities, in particular, saw a correction after a strong third quarter, with the Japanese smaller companies sector down 10% and India down 6.3%. The sectors that did well in the fourth quarter were UK logistics property - up 12%, private equity - up 8.9% - and technology and media - up 8.7%.

“In the case of technology and media, the strong performance in the fourth quarter helped to make up for what had been a much weaker year for the sector than 2020, while logistics property was continuing its winning streak as we all continue to shop more online.”

After allowing for all dealing costs, fund management fees, investment platform charges and taxes, the total value of my forever fund increased by only 9% since the start of this year. That’s substantially less than most stock market indices, such as the FTSE 100 or the S&P 500, but still well ahead of the long-term average return from shares of 7% per annum.

Perhaps it is a sign of bull market psychology that makes me put the word “only” before a return of 9% after all costs. I continue to believe a diversified global portfolio provides some protection against the risks inherent in stock market investment.

After a feverish 2021, the forever fund ‘patient’ is sitting up in bed, wondering what will happen next in 2022. While hopes and fears push share prices up and down, we are not out of the intensive care unit yet.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Baillie Gifford Shin Nippon (BGS), BlackRock Latin American (BRLA), Canadian General Investments (CGI), Gore Street Energy Storage Fund (GSF), JPMorgan Indian (JII), JPMorgan Japan Small Cap Growth & Income (JSGI), JPMorgan US Smaller Companies (JUSC), Polar Capital Technology (PCT) and Vietnam Enterprise Investments (VEIL) as part of a globally diversified portfolio of investment trusts and other shares.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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