Ditch Brazil, buy Russia
Christmas is the perfect time to review your portfolio. John Stepek looks at the best and worst-performing funds of 2016.
There's no particular reason to review your portfolio at Christmas, rather than at some other time of year. However, it's often the only chance you get to sit down for an hour and do otherwise easily neglected jobs. So in the spirit of "buy low, sell high", should you take the time this year to sell your top performers and perhaps invest in a struggling sector?
A glance at the top-performing funds of 2016 (see below) makes it clear that the biggest investment story was the commodities bounce, while Brazil and Russia are close runners-up. We'd be wary of adding money to gold miners just now. They have already turned down if you'd bought the Charteris fund at the start of 2016 and still hold it, you'd have doubled your money but if you'd sold at the peak in August, you'd have trebled it. With the market still betting on a strong US dollar and rising US interest rates, gold may struggle until inflation takes off.
We suspect that this will indeed happen, but it might take a while for the market to agree. We're more comfortable with miners in general. Optimism on growth should boost commodity prices and the strong dollar won't hurt. And despite a rebound this year, they've just emerged from a five-year bear market so there could be a lot more to come.
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Brazil looks vulnerable as optimism on regime change fades and concerns about the impact of a strong US dollar on emerging markets grows. However, Russia may continue to benefit from the oil rally, and from hopes that Donald Trump will be a sympathetic president.
The worst-performing funds are a mixed bag. Biotech looks risky with Trump's approach to US drug pricing unknown, while property's woes may have just begun. Look at UK smaller companies instead the Association of Investment Companies notes the sector has lagged since the Brexit vote, despite improving sentiment. Consider Strategic Equity Capital (LSE: SEC) Barry Norris's Argonaut Absolute Return fund (long a MoneyWeek favourite). Both have had a tough year in 2016, but can point to strong track records over five years.
| Top ten funds* | Total return (31/12/15 to 14/12/16) | Theme |
| WAY Charteris Gold & Precious Metals | 123.50% | Gold miners |
| Junior Gold | 119.60% | Gold miners |
| HSBC GIF Russia Equity | 85.60% | Russia |
| SF Webb Capital Smaller Comp's Gold | 85.10% | Gold miners |
| Smith & Williamson Global Gold & Res's | 82.10% | Gold miners |
| JPM Natural Resources | 80.60% | Miners |
| CF Canlife Global Resource | 74.40% | Miners |
| Investec Global Gold | 72.80% | Gold miners |
| HSBC GIF Brazil Equity | 72.70% | Brazil |
| CF Ruffer Gold | 71.10% | Gold miners |
| Bottom ten funds* | Total return (31/12/15 to 14/12/16) | Theme |
| FP Argonaut Absolute Return | -26.20% | Absolute return |
| CF Odey Absolute Return | -18.00% | Absolute return |
| City Financial Absolute Equity | -14.60% | Absolute return |
| Old Mutual UK Opportunities | -12.20% | Absolute return |
| Invesco Korean Equity | -11.40% | South Korea |
| Franklin Diversified Growth | -10.70% | Absolute return |
| Jupiter UK Growth | -9.10% | UK companies |
| AXA Framlington Biotech | -9.10% | Biotech |
| M&G Property Portfolio Sterling | -8.00% | Property |
| FP Charteris Property | -7.70% | Property |
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