Interactive Investor

20 years of investing in the 21st century

Nearing the end of the 2nd decade of millennium & in the investment world it’s certainly been eventful.

12th December 2019 09:43

by Darius McDermott from interactive investor

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I’m not sure where the past 20 years have gone. But here we are, nearing the end of the second decade of the millennium. And in the investment world it’s certainly been eventful.

I thought it might be interesting to take a look at what the best – and worst – performing investments have been over the period. Some may surprise you.

Best performing funds and trusts

Over the past 20 years, the best funds have been those investing in Chinese equities. The average fund in this sector is up 504%. Next are those investing in European smaller companies (up 352%), followed by our own UK smaller companies (330%). 

The best performing open-ended fund over all is Marlborough Special Situations (up 1059%), which has been managed by Giles Hargreaves for the entire period. He has turned £1,000 into £11,591.

Rather scarily, the average Japanese equity fund has returned 2% less than the average cash fund. It just goes to show that a prolonged deflationary environment can really stifle investment.

The best investment trusts in contrast have been those investing in Asian smaller companies(up 1482%). Trusts investing in property securities were second (1467%) and those investing in biotech and healthcare third (931%). At the other end of the scale, the average venture capital trust (VCT) has lost 60%.

The top performing investment trust has been TR Property (LSE:TRY) (up 1670%). Run by Marcus Phayre-Mudge since 2004, it has turned £1,000 into £17,745.

Each decade in more detail

Looking in more detail at each of the two decades also makes for interesting reading. The first was dominated by technology stocks tanking (the average fund fell 57%), commodities booming (gold rose 274% and oil was up 219%), and emerging markets heading off to the races (the average emerging markets fund rose 240%).

In contrast, the UK stock market was up a mere 19%, while the US stock market fell 12%. And if you ever needed proof that bonds have enjoyed a prolonged bull market, look no further: the best performing bond sector was UK index-linked gilts (boring, safe government bonds), where the average fund returned 62%.

The second decade saw a reversal of fortunes. The commodities super-cycle came to an abrupt end and emerging markets funds have lagged returning 65%.  The UK stock market is up 94%, while the US market is up 292%. Technology funds are up 288% on average – but it did take them until 2016 to recover their losses. The exception has been those index-linked gilt funds. They rose a further 120% over the past 10 years.

What will the next 10 to 20 years hold?

The only thing I can say with real conviction is that bonds will not do as well. The high returns have been made because yields have fallen from around 5% to 0.7%. I cannot see them falling much lower.

I am pretty sure that emerging market funds – Asian equity funds, in particular, – will have their day in the sun once again. Fidelity Asian Opportunities is worth a look, as is Invesco Asian. I am also pretty sure Japanese equities will do better. Comgest Growth Japan is a fund I have come across recently that looks interesting, as is Baillie Gifford Japan (LSE:BGFD).

However, the one enduring theme I think we will experience over the next two decades is the move towards more responsible investing. It is now or never really in terms of our environment, so if I am thinking about a better future for my children, a fund such as Pictet - Global Environmental Opportunities could fit the bill perfectly.

Note: Performance figures are from FE Analytics.

Darius is managing director of Chelsea Financial Services.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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