Thames River duo reveal best and worst funds over Q4

Thames River multi-manager duo Gary Potter and Rob Burdett have revealed the best and worst funds and sectors during the last quarter of the year, with absolute returns funds coming under fire once more.

The duo's quarterly Fund Watch report, which uses Lipper data to analyse fund and sector performance, showed the IMA Absolute Return sector was the fifth worst sector over the three months to 31 December 2011, falling 0.2%, and down 1.2% for the year.

Potter said in a quarter that was generally not brilliant for returns and a year that was certainly not positive for equities, these funds ought to have done considerably better.

"The idea is that they hold up better when equities are struggling, which does not seem to have been the case during 2011. With returns on cash still negligible, it is disappointing these funds have not managed to make any ground," he said.

He added, however, it is important to remember the sector is in its "infancy", and comparison for investors is not easy, given the variety of strategy, geography, positioning and investable universe.

Meanwhile, the two most consistent sectors for top quartile returns were UK Smaller Companies and Japan. Within those peer groups, two offerings from Giles Hargreave at Marlborough and two from Aberdeen were among the best performers.

In contrast, the North America and £ Strategic Bond sectors had no funds achieving top quartile consistency, which the pair said is "not ideal given that these are significant sectors for investors."

Overall, the best performing fund during the quarter was the $20m MFS Meridian Global Energy fund, which capitalised on rising energy prices over the period.

Jayesh Manek's Manek Growth fund was the worst offender, falling 20% over the quarter as the manager's stockpicking style proved unsuited to the current macro-driven environment, Potter and Burdett said: "Holding the fund over the full calendar year was equally painful and would have meant a drop in value of 36%, a 32% underperformance of its FTSE All Share benchmark," they added. 

Of the limited number of new funds launched in the third quarter, Jupiter Global Energy achieved the highest peer group ranking at the third percentile, while the worst perfoming new launch was David Coombs' Rathbone Enhanced Growth.

The multi-asset fund of funds rose 1.7% in its first full quarter, suffering from not being fully invested during the market upswing, and not participating in fixed income during a strong quarter for the asset class.