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Top Equity Funds 2016: Brazil & Russia Returned To Seize The Throne!
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Top Equity Funds 2016: Brazil & Russia Returned To Seize The Throne!

In this annual fund performance update, we take a look at some of the best-performing equity funds on the platform as well as some of the laggards for the year just ended.


Global equity markets as a whole outperformed fixed income during the fourth quarter of 2016, with the equity funds on our platform (represented by the FSMI All Equity index) clocking an average 1.80% return, bringing 2016’s gains to 6.37%. A wider dispersion in equity market segments were seen, with defensive sectors as a whole underperforming their cyclical counterparts – benefiting actively-managed strategies that were well positioned.

US equity funds outperformed in 4Q 16, benefiting from the wake of asset repricing of property magnate Donald Trump’s triumph at the US Presidential Election’s results in early November. The FSMI US equity index registered a 8.24% gain for the fourth quarter, bringing 2016’s average return of US equity funds on our platform to 10.77%. On the other hand, although European equities saw a rebound in 4Q 16, the average return of European equity funds came in at -2.22% in 2016, making the European equity category the bottom performing developed market equity category last year.

Emerging equity markets saw a weaker performance in 4Q 16 but enjoyed relatively stronger performance vis-à-vis their developed counterparts in 2Q and 3Q 16; with the FSMI Emerging Markets Equity index clocking a 9.54% gain last year. Within the emerging markets category, performance between various regions and single countries were also varied, with Brazilian and Russian equity funds outperforming while India, South Korea and Malaysia lagged.

In this annual fund performance update, we take a look at some of the best-performing equity funds on the platform as well as some of the laggards for the year just ended.

Table 1: FSM Equity Fund Indices

S/N

Fund Index

4Q 16

2016

1

FSM Indices - US Equity

8.24% 10.77%
2

FSM Indices - Emerging Markets Equity

-0.39% 9.54%
3

FSM Indices - All Equity

1.80% 6.37%
4

FSM Indices - Global Equity

4.84% 5.77%
5

FSM Indices – Asia Ex Japan Equity

-1.37% 5.26%
6 FSM Indices - Japan Equity 8.04% 3.34%
7 FSM Indices - China Equity -2.41% 1.05%
8 FSM Indices - India Equity -3.19% 0.94%
9 FSM Indices - Europe Equity 2.53% -2.22%

Source: iFAST Compilations, data as of end-December 2016 in SGD terms, with dividends reinvested

Dark Horses Brazil & Russia Returned To Seize The Throne!

While the average return of US equity funds on the platform in 2016 has slightly outperformed the average return of emerging market equity funds, due to the varied performance of emerging markets, certain emerging market equity funds have outperformed many of their counterparts. After suffering rounds of underperformance in late-2014 and 2015, Brazilian and Russian equity funds rebounded strongly in 2016 as Brazil and Russia’s economy started to show signs of recovery, with funds like HGIF Russia Eqty SGD Cl AD and Parvest Eq Russia EUR posting stellar returns of 63.95% and 57.49% respectively, while Brazilian equity funds like Parvest Eq Brazil USD and HGIF Brazil Eqty SGD Cl AD posted gains of 63.65% and 60.96% respectively last year (see Table 2 below).

Other equity funds that came in at the top of the performance ladder for 2016 include funds invested in precious metals equities like gold-related equities (gold mining stocks), with the United Gold and General Fund and Blackrock World Gold Fund A2 USD recording gains of 56.87% and 54.08% respectively despite seeing some losses in the fourth quarter of the year (gold stocks fell in 4Q 16 alongside the decline in gold prices). Resource equity funds also benefited from the general rebound in commodity prices for most of 2016, with funds like Blackrock World Mining A2 USD and JPM Global Natural Resources (USD) A (acc) making full year returns of 55.53% and 54.46% respectively.

Table 2: Top Performing Equity Funds In 2016

Fund Name

4Q 16 Returns

2016 Returns

Segment

HGIF Russia Eqty SGD Cl AD 25.08% 63.95% Russia Equity
Parvest Eq Brazil USD 7.10% 63.65% Brazil Equity
HGIF Brazil Eqty SGD Cl AD 4.60% 60.96% Brazil Equity
Parvest Eq Russia EUR 24.51% 57.49% Russia Equity
United Gold and General Fund -10.04% 56.87% Gold & Precious Metals Equity
Blackrock World Mining A2 USD 6.79% 55.53% Global Resources Equity
Deutsche Noor Prec Metals CL J SGD -17.49% 55.37% Gold & Precious Metals Equity
JPM Global Natural Resources (USD) A (acc) 11.41% 54.46% Global Resources Equity
Blackrock World Gold Fund A2 USD  -12.89% 54.08% Gold & Precious Metals Equity
JPM Russia A (dist) USD 21.41% 47.91% Russia Equity

Source: Bloomberg, iFAST compilations; data as of end-December 2016 in SGD terms, with dividends reinvested

European Equity Funds Underperformed In 2016

Although there was a general rebound seen in the European equity market in 4Q 16, the positive gain was not enough to offset the declines seen in 1H 16. European equities have been weighed down by poor investment sentiment stemming from a combination of rising political uncertainty (from various referendums) and woes about the banking sector in Southern Europe. In particular, Italy’s stock market has lagged her other counterparts on the continent, leading to Fidelity Italy A EUR incurring a -9.46% loss in 2016 as markets watched the recapitalisation phase of Italy’s banks nervously. As shown in Table 3 below, other European equity funds like United European Small/Mid Cap Fund and NATIXIS IF Europe Smaller Cos R/A EUR, which invest in the smaller and middle-capitalised stocks in Europe, did not fare better as well, posting returns of -11.32% and -8.48% respectively. On aggregate, investment returns from European equities were also partially affected by the EUR’s weakness, with the EURSGD exchange rate falling -1.35% throughout 2016.

Health care stocks also saw a rise in volatility for much of 2016 as the US Presidential Election campaigns raged on, which was reversed a trend of continued and sustained gains over the past 7 years. Equity funds invested in the health care sector underperformed in 2016, with funds like Fidelity Global Health Care A EUR and United Global Healthcare Fund - Class SGD (Acc) incurring losses of -11.06% and -8.38% respectively last year. Investors who are interested in the health care sector can consider exposure for the supplementary portion of their portfolios due to its concentration risks.

Table 3: Bottom Performing Equity Funds In 2016

Fund Name

4Q 16 Returns

2016 Returns

Segment

Blackrock European Spec Situations A2 GBP-H 1.25% -21.30% Europe Equity
Blackrock European Fund A2 GBP-H 5.27% -19.95% Europe Equity
United European Small/Mid Cap Fund 0.89% -11.32% Europe Small-Cap Equity
Fidelity Global Health Care A EUR -2.74% -11.06% Global Healthcare Equity
Fidelity Italy A EUR 9.36% -9.46% Italy Equity
Henderson European Prop Sec -4.38% -9.34% Europe Property Equity
Fullerton Lux Asian SC Eq A USD Acc -5.94% -8.76% Asia ex Japan Small-Cap Equity
Henderson Hzn Pan Europn Prop Eq-A2 EUR -3.87% -8.69% Europe Property Equity
NATIXIS IF Europe Smaller Cos R/A EUR -0.85% -8.48% Europe Small-Cap Equity
United Global Healthcare Fund - Class SGD (Acc) -1.05% -8.38% Global Healthcare Equity

Source: Bloomberg, iFAST compilations; data as of end-December 2016 in SGD terms, with dividends reinvested

We Are Overweight Equities Relative To Fixed Income!

While we were holding a neutral stance on equities vis-à-vis fixed income going into 2016, we are now shifting to an overweight stance on equities relative to bonds explained in our outlook for 2017. We expect higher rates of corporate earnings growth across emerging markets as well as developed markets as global economic momentum accelerates, and this should help offset any contraction of valuation multiples in Western developed markets such as the US and Europe. Asian and emerging equity markets have material room for valuations to mean-revert higher, thus providing outsized gains than their developed peers – we are overweight in Asia ex Japan.

If you are unsure and in need professional opinion on the equity markets, don’t fret. Our yearly-event of What & Where To Invest 2017 is coming soon! Come down to seek out the best investment ideas Fundsupermart and other esteemed Asset Management houses have to offer and what other insights they have to offer!


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