Unit Trust Rebound

Sources : Gabriel Chan (Straits Times Breaking News)

THE first six months this year was a great time to be a unit trust investor with many funds that were bleeding to death last year roaring back into positive territory. The average equity fund gained almost 25 per cent in the period, rewarding investors who defied the global financial storm to put money into stocks and bonds.

The figures were based on unit trust distributor Fundsupermart's FSM All-Equity Fund Index (FEFI), which tracks the performance of unique equity funds on its platform. The index rose from 1,000 points to 1,245.25 in the six months.

Fundsupermart reports that some of its top-performing fund categories for the half year are those focusing on Indonesian, Chinese and Indian stocks.

Top of the list was Henderson Horizon China Equity, which turned in a huge gain of 88.2 per cent from Jan 1 to June 30. The fund rode on the China equity market boom while employing leverage and the ability to take short positions. An investor who is taking short positions typically expects the asset to fall in value.

Indonesia was the best-performing market under Fundsupermart's coverage in the first half of this year. Two Indonesian equity funds - FLF Equity Indonesia USD and Fidelity Indonesia - snagged second and sixth place respectively in terms of returns. Indonesia's Jakarta Composite has climbed more than 50 per cent this year, with the country avoiding the recession that has plagued its neighbours. The economy grew 4.4 per cent in the first quarter from a year earlier.

Some of the best-performing funds for the six months were the biggest losers last year, suggesting that buying into hardest-hit funds in a crisis may reap huge rewards.

HGIF Indian Equity, FLF Equity Russia and United Asian Growth Opportunities were all big losers last year, registering declines of between 67 per cent and 73.6 per cent but they staged impressive turnarounds and entered the top 10 this year.

Fundsupermart general manager Wong Sui Jau said that 94.7 per cent of the funds on the platform finished the half year in positive territory and that many made 'gains which were nothing short of extraordinary'.

While bond funds did not do as well as equity funds, the returns for some were still spectacular. Fidelity's European High Yield fund finished tops, with a 32.3 per cent gain in the first half. Typically, a good performing bond fund returns about 10 per cent a year.

Funds sunk into emerging market debt also performed well, as credit market stability returned, lowering the risk of defaults by developing nations like Russia and Brazil. 'People are starting to worry less about risk, so the riskier assets have rebounded sharply,' said Mr Hugh Young, chief executive of the Asia-Pacific arm of Aberdeen Asset Management. 'But things are still tough and far from over, so logically we could still see markets sliding a bit