Four years ago, many people would not have predicted Brexit or President Trump – but then as Gareth Southgate fluffed his penalty in Euro 96, who would have forecast he would one day lead England into a World Cup?
The 2018 World Cup has just kicked off in Russia and there’s already been plenty of action from investment experts off the pitch.
Inevitably, as a major football tournament rolls round and grabs our attention, the investment industry tries to do the same – picking teams of recommended funds.
But how do these fare once the razzmatazz has passed?
Four years ago, This is Money put two fantasy fund World Cup portfolios set up for Brazil 2014 to the test – a globally-focused team from Hargreaves Lansdown and a UK-geared first eleven from Bestinvest.
Now we can now reveal how each portfolio has scored.
From the Brexit vote and election of Donald Trump as US president, to tensions with Russia, worries over the Middle East and the continuing rumbles of the eurozone, there have been plenty of global events for fund managers to consider since Germany lifted the 2014 World Cup.
Some things fall under the category of unexpected, others you may consider entirely predictable, but a good portfolio should weather the knowns and unknowns.
So how did these two do?
The World Cup fund competition
Ahead of the previous tournament in Brazil, Hargreaves Lansdown and Bestinvest put together their own fantasy fund portfolios.
Hargreaves Lansdown’s dream team was a portfolio of funds investing around the world, while Bestinvest went for the British bulldogs of investing in the UK.
We decided to see how each dream team would actually perform over the medium term and in June 2014 put a theoretical £1,000 into each fund using our free investing Power Portfolio service to track them.
Four years later, we managed to remember we’d done that and as the 2018 World Cup arrived we checked up on each portfolio.
Both have a different focus so can’t be directly compared. However, they can be measured against what the wider market has done, although it is important to note that fund performance is not all about all-out returns, the volatility and risk involved in getting there also counts.
Bestinvest: The global fund team
Manager: Jason Hollands
How the Bestinvest portfolio from 2014 fared over the four years to 4 June 2018
Since June 2014, the England team has been through three managers from Roy Hodgson, via Sam Allardyce to Gareth Southgate, while the UK has had two General Elections, a Brexit vote, and persistent interest rate speculation (although four years ago who would have forecast a Bank of England cut before a rise?)
Four years ago, Bestinvest’s Jason Hollands put out a UK-focused side featuring veterans such as Woodford and Schroders.
So have they coped in what has been a busy economic and political four years for the UK?
We virtually invested £10.997.53 (as close to £11,000 or £1,000 a player we could get) and over four years – between the start of June 2014 up start of June 2018 – the portfolio grew 32.8 per cent, to a value of £14,601.
Franklin UK Smaller Companies was the team’s star performer, up 64.8 per cent, but others have been less impressive, such as the Threadneedle UK Absolute Alpha fund, which grew just 10.5 per cent in comparison over the same period.
Did it beat the market?
That near 33 per cent return equates to a respectable average annual return of 7.1 per cent, but the portfolio is slightly behind the performance of the FTSE All Share Index, which returned 34.1 per cent over the same period.
Every team needs fresh legs and so we allowed our fund pickers to tell us what substitutions they would make. Hollands has a number of changes since the last World Cup to cater for retirements and poor performance.
Hollands has maintained his front-line, made up of Chris St John’s AXA Framlington UK Mid Cap fund, Paul Spencer and Richard Bullas at Franklin UK Smaller Companies, and Thomas Moore’s Standard Life UK Equity Income Unconstrained as the central striker.
Hollands explains: ‘Rising star Thomas Moore had suffered some injuries in the aftermath of the Brexit vote due to exposure to domestic smaller company and mid-cap names but is now back on form.”
In midfield, Hollands has replaced Schroder UK Alpha Income, managed by Matt Hudson, and Richard Buxton’s Old Mutual UK Alpha fund for the fresher legs of Alex Saviddes at JO Hambro UK Dynamic and Nick Train of Lindsell Train UK Equity.
Hollands says: ‘Train has a focus on most larger quality growth companies, whereas Saviddes has more of a value focus and a bias towards small and medium sized businesses, so the combination of different styles should add to the depth of the team.”
The retirement of John Wood at JO Hambro UK Opportunities and the impending retirement of Nigel Thomas at Axa Framlington UK Select Opportunities next year has created a selection headache for Hollands, coupled with a loss of form by Neil Woodford and Fidelity’s Michael Clark.
He has replaced these four to generate a new back line of Hugh Yarrow at Evenlode Income, Jupiter UK Special Situations’ Ben Whitmore, JO Hambro UK Equity Income’s James Lowen and Clive Beagles and Richard Colwell of Threadneedle UK Equity Income.
Hollands said: ‘This has been a long in the tooth bull market when ‘growth’ stocks have been en vogue and while the good times may roll on yet for a while, funds which focus on companies that are churning out well covered dividends and are more mindful of the price they pay for shares should prove more defensive if the environment toughens as it will eventually. ‘
Threadneedle UK Absolute Alpha has been retained in goal, praising its ability to short-sell stocks the fund manager believe will fall in value.
Hollands said: ‘In the booming markets since the last World Cup when shares across the board have risen strongly, the fund been dull but the job of a keeper isn’t to score goals, it is to stop losses when the pressure mounts.’
Hargreaves Lansdown: The UK fund players
Manager: Mark Dampier
How the Hargreaves Lansdown portfolio from 2014 fared over the four years to 4 June 2018
The Hargreaves Lansdown portfolio was a global team, with big hitters such as Invesco Perpetual and Threadneedle.
There have been plenty of tough challenges globally for managers. In 2014 Donald Trump was just a reality TV star, but now is the US President while tensions persist over relations with and the aspirations of Russia, North Korea and Iran.
Amid all this, the portfolio has returned 39 per cent since the last World Cup four years ago.
This means the £10,993 we invested is now worth £15,279, a profit of more than £4,000.
The portfolio’s star performer has been Lindsell Train Global Equity, which has returned 106.2 per cent over four years.
Not everyone in the team has been pulling their weight though.
The Invesco Perpetual Tactical Bond fund has returned just 7 per cent over the same period while Newton Real Return is up 7.8 per cent.
Did it beat the market?
This is a respectable 8.3 per cent a year, however, the performance is again behind the market. The MSCI World Index has returned 41.7 per cent over the same period.
Hargreaves Lansdown is sticking to its guns on its portfolio, just substituting the now retired Richard Peirson of the AXA Framlington Managed Balanced fund for the Baillie Gifford Managed fund, run by Iain McCombie and Steven Hay.