Rated Funds review: regional equities, specialists, property

by Andrew Pitts from interactive investor |

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In the second of our series of updates, we cover regional equities, specialist funds and property.

Below we assess which Rated Funds have subsequently made the most of the carnage wrought in the first quarter, and which have not. In the second of our series of updates, we cover regional equities, specialist funds and property.

Click here to read the update for global equities and multi-asset funds, and here for an update on UK funds.

To read more about what triggers a yellow flag on a Rated Fund scroll to the bottom of our first review piece. Asia Pacific

Generally the second quarter saw a strong bounce back for Asia Pacific Rated Funds, although income-focused versions underperformed the return of 22.2% from the benchmark ETF, iShares Pacific ex-Japan Equity Index.

Investment trusts topped the table, led by Aberdeen Standard Asia Focus with a 31.1% return, closely followed by Fidelity China Special Situations, up 30.1%. It is one of three China-focused Rated Funds to post decent gains in the year to date (24 July), but this trust’s performance is three times better than that of Janus Henderson China Opportunities. 

We put the latter fund under performance watch at the last review after it was announced that deputy manager May Wing Lee was stepping up to replace Charlie Awdry in the summer, and we will continue to watch this fund over the next quarter.

The sustainability-minded Pacific Assets trust also performed with credit, up 24.3% over the quarter, while Aberdeen New India bucked the weak market trend in its target country with a 23.2% gain.

Among the choices for income-seekers, Fidelity Asian Dividend and Guinness Asian Equity Income both returned 15.5%, but the latter’s three-year return of 4% is now looking distinctly mediocre. We will put this fund on performance watch and look for evidence of a turnaround.

We will also place Asia Dragon trust under performance watch. Unlike many other Asia-focused funds and trusts in the Aberdeen Standard Investments stable, Asia Dragon has not been performing as we would have hoped, barely keeping up with the index return in periods up to three years and now behind over five.


All actively managed Rated Funds bar European Opportunities IT beat the index tracker return of 18.6% from Vanguard FTSE Developed Europe ex UK Index ETF.

Top of the pile was TR European Growth IT with a 37% gain – a welcome return to form after a difficult period. However, it still has some way to go to beat Montanaro European Smaller Companies IT – which generated a similar return in the quarter – over longer time periods.

EdenTree Amity European also bounced strongly with a 21.7% gain. Previous underperformance was attributed to sector exposure and a tilt towards value, which is unusual for an ethical fund.

JPMorgan European Income IT’s return was in line with the market, but we continue to be concerned about its dwindling size (£105 million market capitalisation) and poor longer-term returns. The managers retain a focus on value and expect the dividend yield to be around 4% on a forward 12-month view. Therefore we are placing the trust on performance watch.

European Opportunities trust’s previous high exposure to Germany’s Wirecard, which is the subject of suspected fraud on a massive scale, contributed to poor returns over the quarter and slippage in the trust’s rating to a 13% discount. Although we still rate manager Alexander Darwall, the wider market has taken a dim view of the Wirecard saga, leading us to place the trust on discount watch.


Funds with a predominantly small company focus led the charge, with three returning in excess of 30% over the quarter. Baillie Gifford Shin Nippon did best of all, with a 36.7% gain on the quarter, followed by Fidelity Japan IT (33.6%) and perennial favourite Legg Mason IF Japan Equity, up 30.9%.

Seven of eight actively managed funds beat the relevant indices, with the one outlier in the quarter being Lindsell Train Japanese Equity, which gained 10.7%, only a little less than the benchmark Topix index.


A stunning 51.9% return from Baillie Gifford American in the second quarter topped the performance table among Rated Funds focused on US equities. That is more than double the market return, as represented by Vanguard US Equity Index, which gained 22.4%.

As is common in a market bounce-back, smaller companies did well. JPMorgan US Smaller Companies IT (+37.1%) and Brown Advisory US Smaller Companies (+32.2%) both bettered the 25.7% gain from the benchmark Russell 2000 index.

As with other regional equity funds, including the UK, those that focus on income have not fared well. Although the 10%-plus returns from North American Income IT and JPM US Equity Income are not to be sniffed at, the year-to-date (24 July) returns are still poor, with the former down 22% and the latter 8.3%. While North American Income’s performance certainly looks worrying, its net asset value is keeping pace with the trust’s benchmark, the Russell 1000 Value index. Its yield is currently 4.2% and the dividend is well-covered by revenue reserves of more than £20 million, which represents 1.5 years of the previous year’s total dividend.


Tritax Big Box Reit staged a strong bounce-back with a 30.7% return over the quarter, placing it firmly among the top performers over all periods up to five years among 17 closed-ended UK commercial property companies.

Unfortunately the opposite is true of BMO Commercial Property, shares in which were the worst-performing among all Rated Funds over the quarter, losing 15.4% and taking the year-to-date losses to more than 50%. The discount to net asset value for the trust has remained persistently wide, currently 56%, and at the time of writing there is still no news as to when monthly dividend payments will be resumed, having been suspended since April. All of this forces us to escalate our action on the trust to placing it under formal review, having previously placed it on discount watch in the first quarter review.

The best performing open-ended property fund was Schroder Global Cities Real Estate, which returned 11.1%, and continues to show strong longer-term performance numbers.


Funds exposed to precious metals, technology and healthcare produced some of the best returns among all Rated Funds in the second quarter. They were led by Ninety One Global Gold, the top-performing Rated Fund in the quarter with a 54.6% return. BlackRock World Mining, which is more widely diversified, returned 40.8%.

Allianz Technology IT, Polar Capital Biotechnology, Jupiter International Financials and the iShares Global Clean Energy ETF all produced quarterly gains of 30%-plus.

Elsewhere, all bar two specialist Rated Funds produced gains of 10%-plus, with less buoyant returns from HICL Infrastructure (+8.1%) and WisdomTree Enhanced Commodity ETF, which gained 5.4%. In the year to date (24 July) the latter-named ETF is one of only four specialist choices to have lost investors money, from a list of 22. The WisdomTree ETF is down 7.1%, while Sarasin Food and Agriculture Opportunities has lost 6.9%.

Our two private equity picks – which would be expected to perform comparatively poorly in stressed market conditions – are also down. Pantheon International has lost 16.7% over the year to date while the 4% income yield provided by Standard Life Private Equity has been something of a cushion, with the shares down just 2.6% in 2020. Shares in both trusts trade on discounts of around 25% to their last stated net asset values. 

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

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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