Funds' mixed results reflect varied picture in markets

IT WAS a mixed month for the Rehab Great Investment Race, with only three of the five participants in the charity investment contest making gains during February.

The diverse performance reflected the mixed picture in markets generally. While equity markets overall performed strongly – despite concerns about rising oil and commodity prices – there was a strong regional diversity.

In contrast to preceding months, global equity returns were particularly robust within developed markets and the euro zone in particular, as sovereign debt concerns were appeased somewhat by successful debt auctions in peripheral euro zone countries.

Emerging markets suffered a correction as the MSCI Emerging Markets index fell by 2.1 per cent due to concerns about inflation and possible interest hikes, though again the performances of different economies varied greatly.

Having consistently been the top performer since the beginning of the Rehab race in November, Merrion Investment Managers ranked fifth in terms of performance in February, with a return of -3.8 per cent. The dramatic turnaround was primarily down to the underperformance of Aer Lingus.

While the fund’s holding in the airline was the main driver of growth in January, it fell by 9 per cent last month as the airline’s share price was hit by investor concerns about industrial disputes at the airline as well as rising oil prices. However, much of the negative impact was offset by the positive performance from the portfolio’s gold exposure, according to Alex Kinsella of Merrion, and the fund is still a long way ahead of the rest of the pack in terms of its overall performance to date.

Kleinwort Benson Investors was the big winner last month, with a gain of 6.1 per cent, leaving it in third position overall.

The performance was again attributable to one particular stock, this time silicon wafer manufacturer MEMC.

“We bought in and out of the stock during the month, on the back of very strong results from the company,” says fund manager Noel O’Halloran. The stock had been underperforming, but was up 30 per cent on the month.

Brazilian oil giant Petrobras also contributed to Kleinwort Benson’s stellar performance in February, with the stock up about 8 per cent on the month.

Irish Life Investment Managers was close behind Kleinwort Benson, with a return of 5.8 per cent last month, leaving it in second position overall.

According to fund manager Séamus Magner, the strong performance was down to two positions, the fund’s Eurostat Lyxor ETF (exchange traded fund) and the performance of satellite company Inmarsat. ILIM bought in and out of the ETF during the month, while it bought into Inmarsat for the first time, with the London-listed stock having a good run during the month.

The Rehab team, led by Frank O’Brien, held its own during the month, coming third in terms of individual performances in February with a positive return of 1.7 per cent, leaving the fund in fourth position overall.

The gain in February was largely attributable to locking in a profit on a basket of US small capitalisation stocks, according to O’Brien, while the fund also took a profit on a small position in Kerry Group following its positive full-year results announcement towards the end of the month.

AIB Investment Managers continued to suffer from its focus on emerging markets, which fell back generally during the month. The fund was down just over a half a per cent in the month, leaving it in fourth place in February and fifth overall.