New Star Investment Trust’s net asset value rose by 4.8% over the year to the end of June 2015 and its share price was 2.8% higher. This compares to a 6.7% return for the IA Mixed Investment 40% – 85% Shares sector and a 10.1% return on the MSCI AC World Index. Shareholders will get a 0.3p dividend.
Reviewing the portfolio, the manager says performance benefited from strong gains made by Asia ex-Japan and Indian equity fund investments during the financial year. The rise in Chinese equities was reflected in the returns of Wells Fargo China, which rose 44.72%, making it the best performer. Liontrust Asia Income gained 13.20% while First State Indian Subcontinent delivered 28.97% as Indian equities rose 12.27% in sterling in recognition of the pro-business reforms of the prime minister, Narendra Modi, and the fall in the cost of oil imports.
By contrast, Neptune Russia & Greater Russia fell 27.22%. Russian equities rose 8.50% in local currency terms during the year under review as the Ukraine peace agreement held but these gains were overwhelmed by the rouble’s 33.55% fall against sterling as commodity prices fell and the dollar strengthened. Countries such as Nigeria and Ghana were even more severely affected because the oil price fell below the cost of extraction. The investment in Investec Africa, which has major holdings in these markets, was sold outright in April
2015.
All the investments in UK equity funds outperformed the UK market because of their high allocations in small and medium-sized companies and correspondingly low holdings in the commodity companies heavily represented in
the ranks of the UK’s largest companies. The Aberforth Geared Income investment trust and the iShares FTSE 250 exchange-traded fund (ETF) rose 15.82% and 14.01% respectively.
The largest investment, Henderson European Special Situations, transferred into the FP Crux European Special Situations fund following the financial year end as the portfolio manager established Crux, a new asset management company. The portfolio manager and investment strategy remain unchanged. The fund gained 8.35% as Europe ex-UK equity markets performed strongly, supported by quantitative easing, a weak euro and a lower oil price. Aquilus Inflection delivered 10.96% as a result of taking both long and short positions in European equities.
Lindsell Train Japanese Equity was also added in April. Japanese equities have performed well since the election of Shinzo Abe ushered in policies of monetary easing, increased public spending and structural reform. The fund invests in a concentrated portfolio of companies with a focus on domestic economic recovery and has benefited from growth in consumer spending.
The prospect of the first US interest rate rise for many years and attendant dollar strength led to a 4.02% fall in the gold price and a 3.59% fall in the Gold Bullion Securities ETF. The fall was magnified in the share prices of gold miners and Blackrock Gold & General fell 19.57%. The investments in gold and gold miners provide diversification benefits and may prove defensive when equity markets are weak.
The relatively low allocation to US equity funds hurt performance as US equities gained 16.79% although Polar Capital Global Technology, which has a US focus, gained 17.45%. During the year under review, the majority of the Company’s cash was, however, denominated in dollars and performance was helped by the stronger dollar.
The six Brompton multi-asset funds and the Brompton UK recovery fund all delivered positive returns. FP Brompton Global Equity performed best as equity markets rose, gaining 8.39%, about 1.7% behind the MSCI AC World Index return.
NSI : New Star underperforms again