Fixed income strategies Aegon High Yield Bond and BlueBay Emerging Market Unconstrained Bond were among the funds to receive the rating, which recognises strategies the FundCalibre research team believes to be the best among their asset class peers.

FundCalibre research director Juliet Schooling Latter noted the £611m Aegon fund’s “excellent” track record in recent years, which has seen it placed among the top quartile of performers in the IA Sterling High Yield sector over one, three, and five years, according to FE Fundinfo data.

Elsewhere, Ashoka India Equity Investment Trust was also commended by Schooling Latter.

She said: “Launched in 2018, this trust invests in Indian companies of all sizes. The trust adopts a stock-picking approach to target scalable businesses with sustainable superior returns on capital. Aided by a huge bank of experienced research analysts, the trust has comfortably been the best performer in its sector since inception.

“We like the trust’s unique approach to stock selection and its ability to go deeper into both the mid and small-cap markets. A highly unconstrained vehicle, we also like its approach to ESG, specifically governance, which can be a critical issue in India.”

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Fidelity Asian Smaller Companies fund manager Nitin Bajaj was commended by FundCalibre for his clear philosophy and wealth of experience investing in the region.

“This is a genuine stockpicking fund with an emphasis on buying good businesses at prices discounted by the market. The fund has a contrarian ‘value’ bias and high active share. Risk is considered in absolute terms rather than relative to any benchmark or peer group,” Schooling Latter noted.

Comgest Growth America was commended for its “clear process” and “experienced management team”. The $990m strategy has achieved top quartile returns in the IA North America sector over one, three and five years.

Meanwhile, the £257m Martin Currie Global Portfolio Trust was also highlighted for its long term performance.

“The trust’s manager, Zehrid Osmani, has proven himself to be an excellent manager of high conviction strategies. The highly-driven research approach has proven to be extremely successful over the longer term across a range of portfolios and we see no reason why this cannot continue on this trust,” Schooling Latter said.

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Ninety One Diversified Income, which launched in 2012, is designed to either replace or complement bonds in a portfolio. The majority of the fund is held in fixed income assets, while it also incorporates strategic equity positions.

“We also like the team’s use of future options and swaps to hedge equity, duration and credit risk,” the FundCalibre research director added.

Four funds were also handed the ‘Elite Radar’ badge, which is awarded to strategies that are on the research team’s shortlist and could receive an Elite rating in the future.

The strategies receiving the rating were Artemis Leading Consumer Brands, GQG Partners US Equity, Man GLG Dynamic Income, and Redwheel Biodiversity.

This article was written for our sister title Portfolio Adviser

The Chinese property sector, which makes up around a quarter of the country’s economy, has been a particular drag on returns over the last year. In January, one of the sector’s leading players, China Evergrande, entered into a forced liquidation.

This was seen in the month’s worst performing individual funds, with the £14.1m Redwheel China Equity, £203.3m Baillie Gifford China, and £5.8m JPM China all among the bottom 10 for returns. Climate strategies, such as Baillie Gifford Climate Optimism and Active Solar also struggled in January.

In contrast, IA North America and Technology were the two best-performing sectors, up 3% and 4.8% respectively.

Ben Yearsley, director at Fairview Investing, said. “These two are so intertwined that it does distort the picture of US equities. Microsoft is again the world’s largest company with a value just under $3trn. But with Apple, Alphabet and Amazon also in the top ten, a tech fund, a Nasdaq tracker, an S&P tracker and a MSCI World tracker look very similar and perform in tandem.”

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He added: “The positive equity stories of 2023 all continue with tech, India, and Japan all starting 2024 with a bang. Two of those areas look pretty expensive – then again they almost always do. Japan remains one of the most interesting stories with corporate change and more shareholder awareness helping drive markets. On the other side, China can’t seem to escape the doom loop – Beijing need a big bang to pull markets from historic lows.”

Yearsley pointed out that, for a brief period of time in January, markets regained some confidence after Beijing announced stimulus measures. However this confidence evaporated, with the Hang Seng index finishing the month down by more than 9%.

“Contrast that with Japan where the Topix put on almost 7% – the BoJ has kept the world’s last remaining negative interest rate policy and wants inflation. Despite the excellent returns from Japanese equities many fund managers are confident on future returns and thinking this is just the start of a sustained bull run. The FTSE had a lacklustre start to 2024 falling 1.27%.”

Oxeye Hedged Income was the top performing fund, returning 9.5% in January. Yearsley noted the fund has regularly topped and tailed the monthly performance tables over the past few years.

Jupiter’s India-focused offerings, Jupiter India and Jupiter India Select, both performed strongly by returning 8.7% and 8.3% respectively. The average IA India fund returned 1.8% over the month.

While the firm pointed out that geopolitical risk only increased last year, it said “there is always a good cohort of fund managers across asset classes” who are able to perform irrespective of how challenging the backdrop is.

Below, Square Mile’s team of fund analysts discuss nine funds they have a “good level of conviction” in for meeting their investment goals in 2024:

Polar Capital Global Insurance

The Polar Capital Global Insurance fund, which holds an AA rating in Square Mile’s Academy of Funds, typically holds 30 to 35 holdings mostly in medium-sized insurance companies. The fund aims to return 10% annually, and avoids investments in long-term liability claims as well as, for the most part, life insurers.

David Holder, senior investment research analyst for Square Mile, said: “We like the AA-rated Polar Global Insurance fund for several reasons, not least due to the proven investment approach of its lead manager, Nick Martin.

“It invests in a sleepy sub-sector of markets that is not widely covered, perceived as complex and which includes many firms of variable quality. Mr Martin has built a deep pool of company knowledge and is well informed in the intricacies of investing in this sector.”

Redwheel Global Emerging Markets

The Redwheel fund, which holds an A rating from Square Mile, aims to outperform the MSCI Emerging Markets index by 3% yearly over five-year periods. The long-term capital growth fund is run by manager John Molloy.

Amaya Assam, head of fund origination, said: “He has an impressive long-term track record and is supported by a diverse and experienced team of dedicated analysts.  Mr Molloy applies a well-constructed process which includes markets that are often overlooked by other investors, and he seeks to take advantage of these where they present attractive growth opportunities.”

Comgest Growth Europe Smaller Companies

The Comgest fund, which invests in 25 to 30 companies with a market cap of €1-€10bn, has an A rating from Square Mile.

“The team’s edge is its company analysis and an absolute return mindset with the strategy’s success measured by investee companies’ longer-term earnings capability,” Assam said.

See also: RLAM and Artemis funds added to Square Mile academy

“The portfolio can have some sizeable positions at the stock, sector and country level which can be a double-edged sword at times, as the portfolio concentration can be beneficial when stock selection is working. However, it can also add to the fund’s volatility, which is already an inherent feature when investing in smaller companies.”

Liontrust Special Situations 

Anthony Cross and Julian Fosh’s Special Situations fund is marked with an AA rating and has 55 holdings, with a fund size of £3.9bn. Established in 2005, the fund has a low stock turnover and operates as a capital growth-oriented strategy.

Mark Hinton, equity fund research manager, said: “The team works in a highly collegiate manner and has complementary skill sets, and together its members apply a very well-considered and defined investment process.  This steers them towards relatively steady businesses that are gradually growing, generating high levels of cash and have a clear competitive edge.”

Man GLG Sterling Corporate Bond

While Square Mile said this ‘positive prospect’-rated bond fund can experience short-term volatility, it believes the fund is a good option for offering growth and income. The fund is managed by Jonathan Golan, who has a goal of extracting “100% of the fund’s performance aspirations through credit selection”, said Square Mile’s Eduardo Sánchez, the associate research director for fixed income, alternatives & multi-asset.

“Unlike many of its peer group, this fund’s edge lies in its bottom-up focus on smaller issuers and Mr Golan’s supporting team’s ability to extract excess returns from undervalued credits; many of which are overlooked by larger scale investors,” he said.

Wellington Global Impact Bond

The Article 9 fund from Wellington holds a Responsible AA rating from Square Mile and has $602.7m assets under management as of 9 January.

“Their impact investment process is well thought through, considering issuers against the materiality, the additionality and the measurability of their impact investment case,” Sánchez said.

“We believe that these considerations have created a very solid base on which the team has built a credible impact strategy while also aiming to provide above-market financial returns.”

Artemis US Smaller Companies

The AA-rated fund has 50-70 companies with a market cap ranging from $1bn to $10bn in US companies. Led by Cormac Weldon, the fund holds £748m assets under management and launched in 2014.

Ajay Vaid, investment research analyst, said: “He and his team believe that investors can be slow to price in the implications of change that can enable style-agnostic investors to outperform the market, regardless of market conditions.

“The team conducts considerable macroeconomic analysis in order to understand cyclical and secular trends, as well as the broader outlook for the US economy.”

WHEB Sustainability

The Responsible AA-rated WHEB fund invests in 40 to 60 responsible companies and holds £717.1m assets under management. Stocks fall under nine themes, including cleaner energy, sustainable transport, resource efficiency, environmental services, water management, well-being, health, safety and education, and must derive 50% of its revenue from these themes.

Charlie McCann, investment research analyst, said: “Collectively, they apply an investment process which sets a high hurdle for inclusion in the portfolio to keep the overall impact high.

“As a result of this process, and where the team tends to find suitable stock ideas, the fund is likely to have significant biases to areas of the market such as the healthcare and industrials sectors, and towards mid-capitalisation companies. Conversely, it is unlikely to have any meaningful exposure to the energy and financials sectors and has a notable underweight to the largest companies within its MSCI World benchmark.”

Ruffer Diversified Return

The Ruffer fund, which holds an A rating, is managed by Duncan MacInnes and Ian Rees, but asset allocation and investment themes are determined by Ruffer’s asset allocation committee which meets at least once a week. The fund balances out global equity investments with holdings including cash, conventional bonds, index-linked bonds, and various derivatives. As of the end of December, it held £1.9bn in AUM.

Alex Farlow, associate director of multi-asset research, said: “The exposure to options and other derivatives is primarily used to reduce directional equity market or interest rate risk when deemed appropriate.

“This sets this fund apart and has been particularly and consistently successful in protecting investors’ capital when it matters most. We note that performance has been disappointing in 2023, but we expect it to bounce back in 2024.”

This article was written for our sister title Portfolio Adviser