Best and worst performing funds in the first half of 2020

by Kyle Caldwell from interactive investor |

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The top-performing fund has posted gains of 64%, while at the other end of the table the worst performer is down 42%.

The vast majority of the thousands of funds available to retail investors posted a loss in the first six months of 2020, but funds heavily focused on technology stocks managed to buck the trend.

Leading the pack at the halfway point in 2020 is Morgan Stanley US Growth (up 64.2%), with its 45% exposure to technology companies paying off. Its top holdings include Shopify, Amazon, Slack Technologies, Uber and Zoom Video Communications. In addition the fund has 21% of its assets in healthcare, which also contributed to its strong performance.

Both technology and healthcare have been standout winners following the systemic changes that have seen millions of people stay home in response to coronavirus. The consensus regarding both sectors, particularly technology, is that lockdown has accelerated existing trends that will continue to play out as lockdown restrictions ease – such as an increase in e-commerce, remote working and online medical consultations. 

Having a big slice of exposure to technology benefited other funds in the top 10: Baillie Gifford American (up 54%), Baillie Gifford Long Term Global Growth (47%), Morgan Stanley US Advantage (41.6%), New Capital US Future Leaders (37.3%) and Baillie Gifford Global Discovery (35.9%).

Matthews China Small Companies (63.2%) also benefited from its exposure to technology and healthcare, as well as to China’s market, which posted one of the strongest rebounds following the sell-off.

Top 10 performing funds 

Funds

Percentage
Return (%)

Morgan Stanley US Growth

64.2

Matthews China Small Companies

63.2

LF Ruffer Gold

56

Baillie Gifford American

54

Baillie Gifford Long Term Global Growth

47

Morgan Stanley US Advantage

41.6

New Capital US Future Leaders

37.3

MFM Junior Gold

36.4

Baillie Gifford Global Discovery

35.9

ES Gold and Precious Metals

34.7

Source: FE Analytics, performance from 31 December 2019 to 30 June 2020 in sterling. Funds included are those retail investors can buy.

Elsewhere, gold funds have shone, with MFM Junior Gold (36.4%) and ES Gold and Precious Metals (34.7%) both in the top 10 performers. The previous metal is viewed as the ultimate safe-haven asset; investors flocked to gold during the sell-off, and its price soared.

In recent months, as markets have been in recovery mode, gold has remained in high demand among investors, primarily because investors are concerned inflation is set to return following promises from governments and central banks to “do whatever it takes” to get economies motoring following lockdown. In theory, this scenario should bode well for gold, which has historically provided a hedge against inflation

Regarding the fund winners in the first half of 2020, Adrian Lowcock, head of personal investing at Willis Owen, notes: “The first six months of 2020 have been amongst the most volatile markets every recorded as large parts of the world entered into lockdown. The impact on stock markets of the spread of coronavirus was a rapid and severe sell-off as investors weighed up the economic cost of shops, bars and restaurants being closed as well as most travel and tourism.

“However, due to equally quick government and central bank actions, markets staged a strong rebound, led by technology stocks. Technology companies have been huge beneficiaries of the lockdown as companies and people turn to digital services to carry on working and living their lives.”

On a sector level technology funds came out on top, followed by UK index linked gilt funds and in third place funds investing in China.

10 best-performing sectors

Investment Association Sector

Percentage
Return (%)

Technology & Telecommunications

20.1

UK Index Linked Gilts

13.7

China/Greater China

13

UK Gilts

10.1

Global Bonds

6.2

Asia Pacific Including Japan

5.4

North America

3.1

Sterling Corporate Bond

2.7

Global EM Bonds Hard Currency

2.4

Global EM Bonds Blended

2

Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis.

At the other end of the table the biggest laggards in the first half of 2020 are dominated by UK funds, accounting for five of the bottom 10 fund performers: ASI UK Recovery Equity   (-42.5%), LF Equity Income, formerly named LF Woodford Equity Income (-42.4%), Aberforth UK Small Companies (-34.2%), ASI UK Constrained Equity (-33.4%) and GVQ UK Focus (-32.2%).

The UK stock market was among the hardest hit globally in the five week sell-off that took place in February and March. While the UK market and UK funds generally have been clawing back losses over the past couple of months, income funds and those that focus on buying ‘value’ stocks have remained among the weakest performers.

10 worst performing funds  

Funds

Percentage
Return (%)

ASI UK Recovery Equity

-42.5

LF Equity Income

-42.4

Schroder ISF Global Energy

-39.7

HSBC GIF Brazil Equity

-38.5

Guinness Global Energy

-36.4

MFS Meridian Latin American Equity

-34.7

Aberforth UK Small Companies

-34.2

Invesco Latin American

-33.7

   

ASI UK Constrained Equity

-33.4

GVQ UK Focus

-32.2

Source: FE Analytics, performance from 31 December 2019 to 30 June 2020 in sterling. Funds included are those retail investors can buy.

In addition, energy funds feature in the bottom 10 following the spectacular oil price decline in March. This was due to a mix of fears of a global slowdown owing to coronavirus and the resulting price war between Saudi Arabia and Russia, two of the world’s biggest producers. Given most UK equity income funds hold Royal Dutch Shell and BP in their top 10 holdings, this also contributed to the underperformance of UK equity income funds in the first half of 2020.  

Overall, as the table below shows, the UK equity income sector was the worst-performing sector in the first half of 2020.

10 worst performing sectors 

Investment Association Sector

Percentage
Return (%)

UK Equity Income

-20.2

UK All Companies

-17.7

UK Smaller Companies

-16.6

UK Equity & Bond Income

-14.3

Property Other

-11.5

Global Equity Income

-6.3

Sterling High Yield

-5.2

Global Emerging Markets

-5.1

Mixed Investment 40-85% Shares

-4.3

Mixed Investment 20-60% Shares

-4.1

Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis.

Looking ahead to the second half of the year, Darius McDermott, managing director of Chelsea Financial Services, notes that “much will depend on how deep and how long the global recession becomes. While there has been – and there will undoubtedly continue to be – central bank and government support, there is bound to be volatility in stock markets.”

He adds: “At times when the market rallies, equities will make some decent returns, but these good days will no doubt be sandwiched between days when markets fall too, so more defensive assets – such as gold and government bonds – will be important to cushion those falls. As ever, having a diversified portfolio is important.” 

 

 

This article was originally published in our sister magazine Money Observer, 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.

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