The best and worst performing funds of 2020 so far: Technology, US and gold

0
14
Stock markets in some countries - like the US - have fared better than others in the aftermath of the Covid crash, just as some sectors, like technology, have surged ahead while others have suffered from the economic impact of the virus.


Funds invested in the US, in technology and in gold have topped the charts for the best performers of 2020 at the end of its tumultuous first six months. 

While the massive global markets sell-off in March was indiscriminate, the recovery was less so. Sectors deemed vulnerable to Covid and the changing commercial landscape it is forming were left behind while technology, biotech and healthcare surged ahead.

Meanwhile, investors also fled to safe-haven assets like gold and government bonds.

Stock markets in some countries – like the US – have fared better than others in the aftermath of the Covid crash, just as some sectors, like technology, have surged ahead while others have suffered from the economic impact of the virus.

Asian countries that seemed either relatively unscathed or emerged quickly from lockdown benefited. Despite its runaway number of cases and its Government’s unpredictable response, the United States’ stock market staged the most dramatic of all recoveries – as reflected in the best funds lists below.  

Fund managers have proved their worth, with active funds doing well in the strongly recovering US market. But less so in the UK, whose stock market has struggled in comparison to the US and Asia, and whose active funds have done less to protect investors from the volatility. 

Laura Suter, personal finance analyst AJ Bell observes that over the six months the FTSE 100 index is down 17 per cent, the FTSE All Share down a similar 18 per cent and the FTSE 250 index of smaller companies down just over 21 per cent. 

‘In comparison the rest of the world is looking brighter, with the S&P 500 market down a more muted 2.9 per cent, the Nikkei 225 down 5.8 per cent and the SSE down 2.2 per cent,’ she adds. ‘The MSCI World index of global companies has delivered a much less dramatic fall of 0.2 per cent over that time.’

The sectarian nature of the global recovery in equities is laid bare in the best and worst performing funds. 

 BEST AND WORST OF ALL FUNDS – AJ BELL
Best performing funds PerformanceWorst performing funds Performance
LF Ruffer Gold56.0%ASI UK Recovery Equity-42.5%
Baillie Gifford American54.1%LF Equity Income-42.4%
Morgan Stanley US Growth53.1%HSBC GIF Brazil Equity-42.1%
Matthews China Small Companies52.3%Schroder ISF Global Energy-39.7%
LF Access Long Term Global Growth 47.8%The VT Oxeye Hedged Income Option37.7%
Morgan Stanley US Advantage38.0%Guinness – Global Energy36.7%
MFM Junior Gold36.4%Alquity Latin America35.6%
Baillie Gifford Global Discovery35.9%Brown Advisory Latin American35.5%
ES – Gold and Precious Metals34.7%JPM – Brazil Equity35.5%
Baillie Gifford Positive Change34.3%MFS Meridian – Latin American34.7%
Source: AJ Bell/FE fundinfo. Performance is total return 01 Jan 2020 to 30 Jun 2020 

The data from AJ Bell (above) differs slightly to that from Willis Owen’s (below) as the former shows the fund’s performance in its local currency while the latter translates returns into sterling. This means that while the AJ Bell figures more accurately represent the actual perfomance of the fund itself, the Willis Owen figures reflect more closely the returns that UK investors will have seen on their online platforms after exchange rates have taken effect.

BEST AND WORST OF ALL FUNDS – WILLIS OWEN
Best performing fundsPerformanceWorst performing fundsPerformance
Morgan Stanley US Growth64.17%ASI UK Recovery Equity-42.48%
Matthews China Small Companies63.23%LF Equity Income-42.40%
LF Ruffer Gold55.97%Schroder ISF Global Energy-39.74%
Baillie Gifford American54.06%HSBC GIF Brazil Equity-38.53%
LF Access Long Term Global Growth 47.79%The VT Oxeye Hedged Income Option-37.65%
Baillie Gifford Long Term Global Growth 47%TB Guinness Global Energy-36.70%
Morgan Stanley US Advantage41.56%Guinness Global Energy-36.41%
New Capital US Future Leaders37.30%MFS Meridian Latin American Equity-34.69%
MFM Junior Gold36.41%Aberforth UK Small Companies-34.20%
Baillie Gifford Global Discovery35.96%Invesco Latin American (UK)-33.69%
Source: Willis Owen/FE Analytics. Performance is total return 31st Dec 2019 to 30 Jun 2020 in pounds sterling

Adrian Lowcock, head of personal investing at Willis Owen, said that the Morgan Stanley US Growth fund led the way due a combination of technology and healthcare stocks.

‘Similarly Matthews China Small Companies benefited from exposure the same sectors as well as the recovery seen in the Chinese markets,’ he added.

‘Rounding off the top three is LF Ruffer Gold. Gold finished the 1st half of the year breaking through $1,800 as the equity rally slowed and investors grew concerned over a second wave of the virus.’ 

The dominance of US-targeted funds can be put down to the three main factors. One, the huge monetary response from the US Federal Reserve and the sense that the Trump administration will not allow a financial crisis in the run-up to an election. 

BEST AND WORST-PERFORMING SECTORS – WILLIS OWEN
10 best-performing sectorsPerformance 10 worst-performing sectorsPerformance 
Technology & Telecommunications20.07%UK Equity Income-20.19%
UK Index Linked Gilts13.69%UK All Companies-17.68%
China/Greater China12.97%UK Smaller Companies-16.59%
UK Gilts10.14%UK Equity & Bond Income-14.26%
Global Bonds6.21%Property Other-11.45%
Asia Pacific Including Japan5.36%Global Equity Income-6.25%
North America3.05%Sterling High Yield-5.20%
Sterling Corporate Bond2.73%Global Emerging Markets-5.14%
Global EM Bonds Hard Currency2.41%Mixed Investment 40-85% Shares-4.29%
Global EM Bonds Blended2.03%Mixed Investment 20-60% Shares-4.06%
Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis  

Two, the preponderance of big global technology stocks in the US indices. And three, the US market generally being seen as a safe bet compared to all other equity markets. 

Laura Suter also noted the bright spot for managed funds Stateside, ‘where active managers have managed to outperform markets on average’. 

‘Usually the US market is dismissed as being too efficient for active managers to outperform, but the volatile markets have proved ripe ground for fund managers,’ she added. ‘The average US fund has returned 3.6 per cent on average compared to the S&P 500’s return of 1.4 per cent.’ 

China’s market has performed well as the country was first to go into and out of a lockdown, which had successfully contained the virus. 

‘The economic recovery in China has been reassuring for investors and helped drive the markets higher, helped by its technology exposure,’ says Lowcock.

‘Government bonds had a strong six months as they once again proved their reputation as a safe haven when stock markets were tumbling. The performance of UK Index Linked gilts was boosted by two interest rate cuts, to 0.1 per cent, and further quantitative easing along with large programmes to support jobs and fiscal stimulus.’

The UK stock market was already unloved thanks to the ongoing uncertainty of Brexit’s impact. The stumbling Government response to the crisis and the worst death rates of all major European nations only exacerbated those reservations among global investors. 

Lowcock adds that as UK stocks are known globally for steady income, dividend cuts have hit the domestic market hard – and especially the UK Equity Income sector, already reeling last year from the Woodford furore. 

UK EQUITY INCOME (AJ BELL)
Best performing funds Performance (%)Worst performing funds Performance (%) 
LF Miton UK Multi Cap Income-7.63MI Chelverton UK Equity Income-30.33
ES R&M UK Equity Income TR-9.14UBS UK Equity Income-30.26
DMS Charteris Premium Income-10.88Courtiers UK Equity Income-29.51
AXA Framlington UK Equity Income-11.09JOHCM UK Equity Income-29.19
FP Octopus UK Multi Cap Income-11.34Premier Monthly Income TR-29.02
Troy Asset Management Ltd Trojan Income-11.62Premier Optimum Income TR-28.62
BlackRock UK Income-12Aberdeen LF ASI Income Focus-28.57
ASI UK Income Equity-12.59TB Saracen UK Income-28.5
LF Gresham House UK Multi Cap Income-14.14Premier Income TR-28.41
Santander Enhanced Income Portfolio TR-14.21Unicorn UK Ethical Income-26.47
Source: AJ Bell/FE fundinfo. Performance is 01 Jan 2020 to 30 Jun 2020 

‘The UK Equity income sector led the worst performers for the first half of the year as companies rushed to cut dividends, some were necessary, some were prudent and some cuts were forced upon companies,’ he said.

‘The rate of dividend cuts in the UK is unprecedented. Many dividend paying companies have lagged in the rally as they sat in areas of the markets not set to benefit from any short-term changes in people’s behaviour – such as energy, financials and insurance.’ 

He noted in addition that the weakness in sterling through the crisis has also helped the UK market to underperform as a weak pound helps improve the performance of international equities.

Laura Suter observes that the average equity income fund manager has lost more than the FTSE All Share and the FTSE 100 – an average fall of 18.9 per cent year-to-date. 

‘What’s more two-thirds of funds in the sector delivered a worse return than the market,’ she adds. ‘The best performing was LF Miton UK Multi Cap Income, with a 6.5 per cent loss.’ 

UK ALL COMPANIES (AJ BELL)
Best performing funds Performance (%) Worst performing funds Performance (%) 
Royal London Sustainable Leaders Trust-2.77ASI UK Recovery Equity-42.48
VT Sorbus Vector-3.88ASI UK Unconstrained Equity-33.36
BlackRock UK-4.08GVQ UK Focus TR-32.18
Marlborough Multi-Cap Growth-4.78GVQ Opportunities TR-31.45
Aviva Inv UK Equity MoM-5.26Ninety One UK Special Situations-30.1
Baillie Gifford UK Equity Focus-5.95UBS UK Opportunities-29.29
Ninety One UK Sustainable Equity-6.19JOHCM UK Dynamic-29.19
CFP SDL Free Spirit-6.84Jupiter UK Growth TR-29.19
VT Castlebay UK Equity-7.17VT Cape Wrath Focus-29.16
MI Charles Stanley Equity-7.18Aviva Inv UK Listed Equity High Alpha-28.83
Source: AJ Bell/FE fundinfo. Performance is 01 Jan 2020 to 30 Jun 2020 

Suter noted that fund investors will be dismayed that UK active funds have failed to prove their worth over this time. 

‘The average UK All Companies fund has delivered the same return as the FTSE All Share year-to-date, of -16.6 per cent. In total, almost half have delivered a worse return than the index,’ she said.

‘No UK All Companies funds managed to achieve a positive return, with the best performance coming from ethical fund Royal London Sustainable Leaders Trust, with a 2.8 per cent loss. It benefitted from its lack of exposure to oil and energy companies and its overweight to healthcare and technology stocks. 

‘The worst performing was value-focused ASI UK Recovery Equity, which lost investors 42.5 per cent year-to-date.’

ABSOLUTE RETURN 
 Best performing fundsPerformance (%)Worst performing funds Performance (%) 
Argonaut FP Argonaut Absolute Return20.51Natixis H2O MultiReturns-23.95
Kames Global Equity Market Neutral9.4Liontrust GF European Strategic Equity-23.91
Wellington Global Total Return8.47BlackRock Emerging Markets Absolute Alpha-20.72
BlackRock European Absolute Alpha7.72VT iFunds Absolute Return Orange-19.35
Thesis TM Tellworth UK Select7.55Jupiter Absolute Return-13.01
GAM Star Emerging Market Rates7.29VT Woodhill UK Equity Strategic-12.57
Merian UK Specialist Equity7.08Winton Absolute Return Futures-10.42
Eaton Vance Int (Ire) Global Macro6.96VT iFunds Absolute Return Green-9.79
BlackRock Systematic Global Long Short Equity6.47BNY Mellon Global Absolute Return-9.24
Allianz Fixed Income Macro5.76GAM Star Global Rates-8.78
Source: AJ Bell/FE fundinfo. Performance is 01 Jan 2020 to 30 Jun 2020 

Additionally, Suter observed that many investors will have wanted to switch to ‘Steady Eddy’ funds in the market volatility, hoping to mitigate their losses. 

‘But many Absolute Return funds have failed to live up to their mandate of reducing downside risk during bumpy markets. On average the sector delivered a loss over the year to date of 2 per cent and almost two-thirds of funds have delivered a loss during the period,’ she said.

‘The worst of a bad bunch was Natixis H2O MultiReturns with a -24 per cent loss – far more than equity markets. Argonaut Absolute Return had the highest return, at 20.5 per cent.’

Although Suter notes that, ironically, such stellar gains in a time of crisis is ‘maybe not the performance you’d expect of an absolute return fund that’s aiming to deliver stable returns in all markets’.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here