Best and worst-performing funds in March 2021

UK funds had a strong March, but at the wrong end of the table three Baillie Gifford funds feature.  

Two UK fund sectors were in the top five best-performing sectors in March. Both sectors have benefited from the ‘reflation trade’ that has been playing out in the markets.

Figures from FE Analytics, compiled by Shore Financial Planning, show UK Equity Income and UK Smaller Companies were the second and third best-performing sectors last month, returning a respective 4.8% and 4.3%. The duo were pipped by Global Equity Income, in which the average fund returned 5.1%. In fourth and fifth place were Europe ex UK and North America, up 4.2% and 4.1%.

Among investment trusts, it was a similar story with the UK Equity Income sector topping the tables with a return of 7.5%, followed by UK All Companies and UK Equity & Bond Income, both up 7.3%.

The UK market has been hotly tipped to be one of the main beneficiaries of the ‘reflation trade’ (economic growth and inflation accelerating at the same time), which is a market trend that has been playing out over the past couple of months. Cyclical stocks, which the UK market has plenty of, are expected to perform well under the reflation trade.

• Even if the rotation has legs, stick to this golden rule of investing 
• Golden rules for investors: diversify, but not too far 
• ii Super 60 investments: quality options for your portfolio, rigorously selected by our impartial experts

In addition, an improvement in the outlook for dividends, following a number of firms returning to the dividend register in recent months, has boosted investor sentiment for income shares.

Ben Yearsley, investment director at Shore Financial Planning, notes the UK’s vaccine roll-out is also having a positive impact on sentiment.

He adds: “In the UK, the virus appears to be receding quickly, and the partial re-opening over the last few weeks hasn’t had a material impact on caseloads. This bodes well for the economy as restrictions are eased further over the coming weeks and months. The question now is how big the economic rebound will be and whether central banks are prepared to let economies run much hotter without putting rates up.”

In the overall top 10, covering all funds (not just those available on interactive investor), three UK funds feature: RWC UK Value, Jupiter Income Trust and Stonehage Fleming UK Equity Income.

Top 10 performing funds in March 2021 

Performance figures 28 February 2021 to 31 March 2021. Source: FE Analytics.

In terms of the losers, gold funds dominated, but it was also notable to see three Baillie Gifford funds in the bottom 10 performers: Baillie Gifford Global Discovery, Baillie Gifford Health Innovation and Baillie Gifford American.

This serves as a reminder of the benefits of diversification, which can be achieved by investing in a mixture of fund styles (such as growth and income) as well as across different assets (shares, bonds, property and alternative investments).

“The top of the performance tables for March is dominated by out-of-favour value and cyclically focused funds. [It is important to] have balance in portfolios and [remember] that one style doesn’t dominate in perpetuity,” adds Yearsley.

• Don't fall into this funds and trusts trap 
• Examine the pension saving habits of investors at different life stages 

In terms of sectors, China/Greater China was the worst performer, with a loss of 4.6% over the month, followed by Global Emerging Market Bonds Local Currency and Technology & Telecommunications, down 4.6% and 2.5%. Completing the bottom five sectors were Asia Pacific including Japan and Global Emerging Market Bonds Blended, both losing 0.8%.

Bottom 10 performing funds in March 2021 

Performance figures 28 February 2021 to 31 March 2021. Source: FE Analytics.