Which of our funds are in the money flow?

Posted by Stephen Sutherland on Wed, Sep 17, 2014 @ 01:30 PM

Each month we like to make sure that the funds we own are acting right. In our opinion, as well as long-term performance being a key factor in fund selection, the short-term performance of a fund is very important once you own it. It’s vital because we’ve noticed that strong funds tend to get stronger and weak funds tend to get weaker.

This information is taken from The Big Picture, to download a sample copy please just click here.

On August 28th 2014, we took a good look at the returns of the eight funds that we owned, the returns of the FTSE 100 and returns of the NASDAQ Composite. This is what we discovered:

The Big Picture September 2014 MARKETING v5 7

When this data was collected*, the laggard in our portfolio was Fund E. This helped confirm that it was wise to aggressively par down on CLASSIFIED and move that capital into CLASSIFIED. Fund A that we bought in July looks to an untrained eye as if it’s stalling but its 3-month performance is a big clue to say that it may be simply consolidating before its next push higher. As you can see when you view its 3-month performance, over that 12-week period it returned 10.4% compared to the NASDAQ Composite’s 7.9% and the FTSE 100’s -0.2%. This means it could be setting up for a powerful breakout move to the upside.

* Performance data collected 28th August 2014. 

Fund A about to break out?

The Big Picture September 2014 MARKETING v5 8

Take a look at its 3-year chart and you can clearly see a very bullish cup-with-handle formation (Point 1) and on August 28th, it started what looks as if it could be a breakout attempt (Point 2). This funds performance over the last quarter and its chart pattern are the two main reasons why for now we still rate it.

Important notice

Due to recent analysis of the funds we own, we decided to make some changes (switches) in our portfolio. These occurred Saturday 6th September 2014. The performance data collected August 28th 2014 and September 3rd 2014, told us that CLASSIFIED continued to underperform and this confirms that capital continues to flow out of the CLASSIFIED and into other areas around the world. As well as looking at how our portfolio is performing, in healthy markets, we scan for possible investment opportunities. During our searches we spotted huge capital inflows into the CLASSIFIED and then subsequently found a ‘CLASSIFIED’ fund that excited us and passed all our investment criteria.

On the strength of this, we decided to switch 100% of the capital currently invested in Fund E plus 50% of the money we had parked in cash into this new fund. Its name is CLASSIFIED and the full details of these switches and the rationale behind our decisions were published in Saturday 6th September 2014’s Daily Market Update.

Our outlook for 2014 and beyond

Year to date we are proud to be sitting on a gain of 2.9% versus the FTSE 100’s 1.9%**. Even though it’s only a small return for the year, we still have four more months to run and historically the final quarter of the financial year tends to be kind to investors who are long the market. Without a doubt, our recent performance has impressed us for two reasons. Firstly because in 2013 we made an annual  return of 23.1% versus the FTSE 100’s 14.4% and secondly because in last month’s The Big Picture we reported that on the 26th of July 2014 (approximately 6 weeks ago), we were sitting in a year to date loss of 1.7% compared to the FTSE 100’s gain of 0.6%. It is very clear to us that this 4.7% 6-week return of ours compared to the FTSE 100’s 1.3% over the same period  was absolutely down to our recent decisions to reduce our exposure to UK equities and to take out significant positions in Indian, Asian and Japanese equities. This reminder that no sector or country forever remains ‘hot’ demonstrates the importance of a dynamic active approach to portfolio management.

The key during these periods of aggressive rotation is to quickly spot where capital is flowing out of, where it’s flowing into and act swiftly and decisively. During these times, it’s vital to make the necessary changes to your portfolio so that you can quickly get back ‘in the money flow’. And for those investors who ‘freeze’ like a deer in the headlight, their portfolio could get seriously ravaged. So far we believe we’ve done quite a good job spotting this early by picking up on the capital outflows from CLASSIFIED and capital inflows into CLASSIFIED, especially in the CLASSIFIED regions.

We believe that it will probably take a little time until we see any real impact to our returns from these recent portfolio changes and we still expect to see things really pick up in the last quarter of this year. Beyond 2014, we expect solid performance from the equity markets and this means that if you are a long-term investor like us, and have the courage to stay in the game, the future is looking bright.

** Performance data collected 5th September 2014.

Exceeding performance expectations

Our aim is to outperform the FTSE 100 and we are proud of our 23.1% 2013 return which some would say is impressive and even more so when compared to the FTSE 100’s 2013 return of 14.4%. As you can see on this bar chart, we’ve also delivered solid returns over the last 5 years*** and managed to make an average annual gain of 14.5% versus the FTSE’s 8.8%.

The Big Picture July 2014 MARKETING v7 9

*** 31st December 2008 - 31st December 2013. ISACO investment performance verified by Independent Executives Ltd. 

Long-term performance

If we go back even further, since beginning investing back in 1997, we’ve outperformed the FTSE 100 by 60.2% which means we’ve beaten the main UK stock index on average by 2.4% per year****.

The Big Picture July 2014 MARKETING v7 9b

**** 31st December 1997 - 31st December 2013. ISACO investment performance verified by Independent Executives Ltd. 

This information is taken from The Big Picture, to download a sample copy please just click here.

As always, if you have any questions or thoughts on the points covered in this post, please leave a comment below or connect with us @ISACO_ on Twitter.


ISACO specialises in ISA and SIPP Investment and is the pioneer of ‘Shadow Investment’; an easy way to grow your ISA and SIPP at low cost. Together with our clients, we have an estimated £57 million actively invested in ISAs and pensions*****. Clients like us because we have a great track record of ‘beating’ the FTSE 100******. Over the last 16 years, we’ve outperformed the Footsie by 60.2% and over the last 5 years, we’ve averaged 14.5% each year versus the FTSE 100’s 8.8%. You can find us at www.ISACO.co.uk.

What is Shadow Investment?

Picking the right fund for your ISA and SIPP is not exactly the easiest job in the world. And knowing 'when' to buy and 'when' to exit is even more difficult! Our ‘Shadow Investment’ Service is here to help. Our service allows you to look over our shoulder and buy the same funds that we are buying.

When we are thinking of buying a fund, we alert you so that you have the opportunity to buy it on the same day that we buy it. We also tell you about when we are planning to exit the fund. You control your investment account, not us. You can start small and invest as little or as much money as you like.

By knowing what we are buying, when we are buying and when we are exiting, throughout the year you can mirror our movements and in effect replicate our trades. This means you have the opportunity to benefit from exactly the same investment returns that we get. Our investment aims are 10–12% per year.

We are totally independent, fully transparent and FCA compliant. We’re warm, friendly and highly responsive and it’s a very personal service that gives you direct access to the Sutherland brothers; ISACO’s two founders.

Who are ISACO’s clients?

Clients who benefit most from our service have over £250,000 actively invested and the majority of them are wealthy retirees, business owners, self-employed professionals and corporate executives. We also have clients from the financial services sector, such as IFAs and wealth managers.

Do you have questions?

To have all your questions answered, call 0800 170 7750 or email us at: info@ISACO.co.uk.

Data collected 28th August 2014.
** Data collected 4th September 2014.
*** 5 year performance: 31st December 2008 - 31st December 2013. ISACO investment performance verified by Independent Executives Ltd.
**** Long-term performance: 31st December 1997 - 31st December 2013 ISACO 91.3%, FTSE 100 31.1%. ISACO investment performance verified by Independent Executives Ltd.
***** 15th November 2012: Internal estimation of total ISA and pension assets owned by ISACO Investment Team and ISACO premium clients.
****** 5 year performance: 31st December 2008 - 31st December 2013. Long-term performance: 31st December 1997 - 31st December 2013 ISACO 91.3%, FTSE 100 31.1%. ISACO investment performance verified by Independent Executives Ltd.


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Topics: Investment strategy, Investment news