Podcast Center
Video Center
Webcasts
Resource Center
Events
February 06, 2015 at 01:34 PM
Love them or hate them, some funds — much like critically acclaimed film characters — keep investors at the edge of their seats.
Morningstar’s Josh Charlson compares a few top-performing funds to movies in a recent online report.
The head of alternative funds research acknowledges that with returns of nearly 14% and 6%, respectively, last year, S&P 500 and the Barclays U.S. Aggregate Bond Index may have stolen the spotlight from funds focused on other investments.
But Charlson feels that investors and advisors should take a look at three areas of funds that could produce excitement this year, based on their 2014 results.
“Keep in mind that great performances aren’t always uplifting — recall that Anthony Hopkins won Best Actor for playing Hannibal Lecter,” explained the CFA. “There weren’t too many 2014 alts performances quite that terrifying, but investors in some strategies definitely had a bumpy ride.”
Keep reading for the three fund categories Charlson says are primed for Oscar-worthy performances this year:
‘American Sniper’ (aka Dollar Dominator)
Comparing the U.S. dollar to the lone gunman, Charlson says the currency stands on its own among currencies recently.
“While major currencies across the globe faced challenges — from central bank stimulus in Japan, to economic struggles and European Central Bank easing in the eurozone, to commodity-export weakness in the Australian and Canadian markets — the U.S. economy continued to find solid footing as one of the few sources of growth worldwide,” he explained.
In 2015, it could benefit further thanks to the Federal Reserve’s plan to raise interest rates.
Still, many multi-currency funds had a bad 2014, chiefly because they short the U.S. dollar.
Overall, the category lost an average of 1.64% on average last year.
Hard-currency funds, such as the Silver-rated Templeton Hard Currency (ICPHX) and Merk Hard Currency (MERKX) had rough 12-month experiences, though more flexible absolute-currency funds, like the John Hancock Absolute Return Currency (JCUAX) — had more long-dollar exposure and ended the year with a 1.26% return.
In the near term, the Morningstar analysts says he agrees with Bill Gross of Janus: The U.S. remains the global markets’ “cleanest dirty shirt,” and dollar strength should continue.
‘Wild’ (aka Managed Futures)
In “Wild,” the main character goes hiking on the Pacific Crest Trail to rediscover herself.
In Charlson’s view, managed-futures investors have been on “a similar trek through the wilderness …, enduring the deprivation and humiliation of paltry (and often negative) returns since 2009.”
