Interactive Investor

Most funds post negative returns in first month of 2022

Growth and tech shares have come under the cosh, which led most funds to lose money in January.

7th February 2022 10:59

Kyle Caldwell from interactive investor

Growth and tech shares have come under the cosh, which led most funds to lose money in January. 
 

Most funds failed to keep their head above water during the market rotation that took place in January. Data from FE Analytics shows that out of the universe of just over 5,000 funds, close to 90% posted losses.

In recent weeks, the market has been rotating towards value shares, which tend to be more economically sensitive and benefit from higher interest rates.

At the other side of the trade, many growth and tech shares have come under the cosh. With US interest rate rises looming, investors are questioning the high valuations of such stocks and some have been taking profits following a strong run of performance over the past decade and since the start of the Covid-19 pandemic.

Funds and investment trusts with a bias towards, or exclusive focus on, technology shares have suffered sizeable short-term losses. In January, Allianz Technology Trust (LSE:ATT) posted a share price decline of 19% and Polar Capital Technology (LSE:PCT) was down 15%.

Scottish Mortgage (LSE:SMT) saw a share price fall of 16.5% in January. The trust, which is consistently the most-popular trust each month among interactive investor’s customers, backs disruptive companies that have a technological edge over competitors. Top 10 holdings include Moderna (NASDAQ:MRNA), Tesla (NASDAQ:TSLA), Tencent (SEHK:700) and Delivery Hero (XETRA:DHER).

The overall worst-performing fund in January was Baillie Gifford American, down 27.9%. Baillie Gifford Health Innovation, another fund from the firm’s stable, is also in the bottom 10, down 24.3%.

Bottom 10 fund performers in January 

Fund 

Return (%)

Baillie Gifford American

-27.9

Morgan Stanley Global Insight

-27.5

MS INVF Global Insight

-25.5

MS INVF US Growth

-24.6

Baillie Gifford Health Innovation

-24.3

Morgan Stanley US Advantage

-24.3

T. Rowe Price Global Technology

-24

Baron Global Advantage

-23.7

Granahan US SMID

-22.2

Artemis Positive Future

-21.8

Source: FE Analytics. Performance figures from 31 December 2021 to 31 January 2022. Past performance is not a guide to future performance.

Energy funds dominated the top-performing funds' list in January. Five energy funds were in the top 10 after their strong performances in 2021.

High oil prices and the switch to value stocks meant Shell (LSE:SHEL) and BP (LSE:BP.) had a strong month, with share price returns year-to-date of 22.9% and 13.5%. UK banks also saw their share prices boosted in January, as investors anticipated further interest rate rises by the Bank of England. Higher rates are typically good for lenders, which pass on higher borrowing costs faster than they increase savings rates. Last week, the Bank of England made its move, by increasing interest rates for the second time since the pandemic, from 0.25% to 0.5%.

Both sectors drove the FTSE 100 to return 1.1% in January, while the US S&P 500 was down 5.2%.

Ben Yearsley, director of Shore Financial Planning, says: January saw some savage price falls from some of the Covid-19 winner stocks. Is this down to tiny rate hikes or the realisation that valuations were simply too high for some of these stocks?

“On the flip side, old school value had a good month seen through the lens of the top-performing FTSE 100 driven by oil. Is oil topping $90 the new normal? With oil companies showing no interest in expanding capacity, partly as they are spending billions on renewable energy, it feels like a high oil price is here to stay.”

With specialist funds, including those that invest exclusively in energy companies, it is important to hold only a small amount, as our recent article explains.

Top 10 fund performers in January 

Fund

Return (%)

AQR Style Premia

15.3

BlackRock GF World Energy

14.8

AQR Systematic Total Return

14.2

TB Guinness Global Energy

14.1

Guinness Global Energy

13.9

HSBC GIF Brazil Equity

13.6

Schroder ISF Global Energy

13.5

GS North America Energy & Energy Infrastructure

11

JPM Brazil Equity

10.9

VT Clear Peak Capital UK Long/Short Equity

10.8

Source: FE Analytics. Performance figures from 31 December 2021 to 31 January 2022. Past performance is not a guide to future performance.

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