Finance and industry come up Trumps for funds

News of Trump’s election on November 9 as the 45th US President was not the outcome most investors were expecting.

But some fund managers with a value-oriented style – who look for unloved and underpriced gems – found that their bets on banks and manufacturers benefited from a “Trump Jump”. According to US-based Causeway Capital Management, “we expect that there may be both tax cuts and fiscal stimulus in the US, a net positive for the domestic financial sector”.

Global equity funds run by Investec, Schroders, Invesco and US managers Harris Associates and Dimensional Fund Advisors topped the charts.

To calculate performance, Financial News looked at the 238 mutual funds in the Investment Association’s global equity group, which report data to FE Analytics, between November 9 and November 10. Because UK mutual funds price from midday to midday, that period captures almost the full day of US market trading that followed the news of Trump’s win.

The top performer among global equity funds on sale in the UK was Investec Asset Management’s Global Special Situations fund, managed by Alessandro Dicorrado and Steve Woolley. It rose by 5.8%, on a day when the average fund was up 1.8% and the MSCI World was almost flat.

The fund profited from a 35% weighting in financial stocks, 17.8 percentage points more than the index, and an overweight position in industrials as well. Top holdings include Bank of America and Citigroup, as well as US industrial manufacturer Deere & Co.

Dicorrado said: “The portfolio is constructed of stocks that we think are cheap compared to long-term normalised earnings power. At present this means a large allocation to financials, in particular banks, and general industrial stocks such as equipment manufacturers. Both of these sectors jumped on the day of the election, apparently due to expectations that Trump’s victory heralds greater fiscal stimulus, and hence more construction activity as well as higher inflation.”

An Investec spokeswoman stressed the importance of focusing on long-term performance rather than a single event, however significant. Over three years to November 10, Investec’s fund is up 47.87%, making it the 54th best performing fund of 238 in the sector.

A concentrated global equity portfolio run by Chicago-based Harris Associates was the second-best performer on the day, up 5.4%. It has a large overweight position in financial stocks; a third of the fund against 16% for the index, as well as an overweight position in industrials and a big underweight to consumer staples, the worst-performing sector on the day of Trump’s win.

Daniel Nicholas, client portfolio manager at Harris Associates, said: “Our portfolio benefited from strong performance in financials and cyclically exposed companies post-election.

“Since the election, investors have started to rotate to previously beaten-down areas like financials and cyclicals. High quality businesses in these areas offered compelling value, in our opinion. Sentiment has improved towards financials on hopes of higher interest rates and less onerous regulation.”

The third-best performing fund was Schroders’ Global Recovery fund, managed by Andrew Lyddon, Kevin Murphy and Nick Kirrage, aimed at out-of-favour stocks. Its top overweight holdings include HSBC and miner Anglo American, both of which rose strongly on news of Trump’s win.

Dimensional’s fund came in fourth, while Invesco’s fund was the fifth-best performer on the day. Nick Mustoe, chief investment officer at Invesco, said the fund had benefited from an exposure to more cyclical parts of the market, such as banks, which it has felt are undervalued.

Mustoe said: “As long-term investors, we have been patient and since July that patience has been rewarded. The significant change in sector leadership in favour of the cyclical areas of the market seen since July has been given a further shot in the arm since Donald Trump’s recent election victory. In our view, the US election outcome will likely lead to move towards more pro-growth fiscal policy, which could improve the outlook for many of the companies we own.”

A Schroders spokeswoman said: “If value is due to perform in a Trump presidency, as many strategists are currently speculating, you would expect our funds to continue to benefit and be towards the top of the performance tables.”

Dimensional declined to comment.

At the other end of the chart, funds investing in “safer” stocks such as utilities and consumer staples suffered. Fidelity’s Global Consumer Industries fund, Standard Life Investments’ Global Smaller Companies fund, and a global listed infrastructure fund from First State Investments, were all hit.

Fidelity’s fund, managed by Aneta Wynimko, is a £495 million specialist fund that invests in companies “involved in the manufacture and distribution of goods to consumers”. Top holdings include Amazon, Colgate-Palmolive and cigarette maker Philip Morris International.

It suffered amid consumer stocks more broadly. Overall, the MSCI World was almost exactly flat in sterling terms from November 9 to 10, and so too was the Consumer Discretionary category, covering companies focused on producing goods for discretionary spending. But the more defensive Consumer Staples category was hard hit, with a 3% fall, one of the worst-performing sectors on the day.

The Fidelity fund’s 2.7% fall over the 24-hour period came despite a good long-term record. It is 66th of 238 funds in the sector over three years.

A spokesman said: “Our investment approach is not influenced by daily market fluctuations and we don’t get distracted by short-term noise. While short-term volatility is a natural part of investing, this fund has a focus on long-term capital growth.”

A passive fund from Virgin Money, the Virgin Global Share fund, was the second-worst performer. A spokesman for Virgin said the drop in the fund’s price between November 9 and 10 was in part due to a price-timing issue, and in part because it will have a lower exposure to the US stock market than many peers.

Standard Life’s Smaller Companies fund, managed by Harry Nimmo and Alan Rowsell, has a 21% weighting in consumer discretionary stocks and 10% in consumer staples. Its weighting in financials, at 9.2%, is comparatively small. It was the third-worst performer in the sector on the day.

The fourth-worst performer was First State’s listed infrastructure fund. While Trump has promised a boost for US infrastructure spending, the fund also has a large position in utility stocks – which were among the worst performers on November 9-10. A spokeswoman said: “It is more important to focus on the long-term investment horizon rather than on a single day’s performance.”

Standard Life Investments did not respond to request for comment in time for publication.

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