By Ruth Alexander Japanese and smaller companies unit trusts are topping the three year performance...
By Ruth Alexander
Japanese and smaller companies unit trusts are topping the three year performance tables to 9 January.
Three Japanese funds make it into the top 10 including the Invesco Japanese Small Companies fund, ranked second overall out of 1,267 unit trusts which post three year track records, returning 200% over the three year period.
A fourth fund which invests in this equity market, Invesco Japan Growth, is listed in 24 position.
Although the Japanese unit trusts have all returned more than 170% cumulatively over the past three years, over the one-year period to 9 January, the unit trusts have performed less well, showing negative returns.
The Invesco Japanese Small Companies fund has returned -54.9% over the year, while LeggMason New Japan fund, ranked seventh over three years with returns of 178%, fell -40.7% over one year. The Gartmore Japan Small Companies fund, with returns of 173% over three years, posted better one year returns than other Japan trusts falling only 13.7% over one year.
Mark Dampier, investment manager at Hargreaves Lansdown, said: "The strong statistical performance of Japanese funds over the past three years is a classic example of cumulative figures being misleading. The Japanese unit trust performance figures are high because of the big surge in the Japanese market in 1999 when its stocks were cheap. Some stocks returned more than 300%, at this point. However, the appointment of banking supervisors marked a turning-point, and after the market's peak in January and February of 2000, it has fallen by about 50% due to over-valuation. Japanese funds have been among the worst performers in 2000, and the downwards spiral is continuing."
The smaller companies unit trust showing the best returns, on a three year basis, is the Duncan Lawrie Smaller Companies fund, which is ranked fourth out of 1,267 funds, returning 192% on a bid-to-bid basis.
Dampier said: "In October 1998, the UK small-cap market bottomed-out. Everyone had favoured blue-chip stocks and index tracker funds, while smaller companies had been unloved.
Eventually, that anomaly had to be ironed-out. Since that turning-point in the final quarter of 1998, the smaller-companies market has increased by around 50%, while the FTSE 100 has largely stood still."
Despite the volatile technology market over the past year, strong performance in 1999 help to boost the three-year track records of select tech funds, including Henderson Global Technology. Over three years the fund has returned 192%, on a bid-to-bid basis, while Aberdeen Technology has returned 174% and Aegon technology returned.
The best performing retail unit trust is the City Financial Bio-tech fund, which has returned 287%, on a bid-to-bid basis, over three years to 9 January 2001.
Emerging markets funds make up a large proportion of the 20 bottom-performing unit trusts with three year track records, although one emerging markets fund and two Korean funds score in the top 20.
Eight emerging markets funds are ranked among the 20 lowest performing unit trusts, the worst of all being Scottish Widows Emerging Markets fund, which has returned -28.9% over three years to 9 January 2001. It is ranked 1266 out of 1267.
Emerging markets may be close to an upturn in their fortunes as they are so cheap and unpopular, as well as being sensitive to US interest rates, Dampier said.
The unit trust that has returned the least, over three years, is Fidelity Asean unit trust. It has returned -70.6%.
Latin American funds have also had a poor run since 1997, five of them being ranked in the bottom 20 unit trusts.
The worst performer in the sector is Scottish Widows Latin American fund, which has returned -20%, on a bid-to-bid basis.
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