Asian equity strategies, one UK small-cap portfolio and Baillie Gifford-managed funds have emerged as the best performers one year on from the coronavirus sell-off, FE fundinfo data shows.
Although the outbreak of Covid-19 was declared a public health emergency as early as January, financial markets did not start to fully appreciate the severity of the global pandemic until late February.
The first two months of 2020 saw global equities gradually rise despite the escalating health crisis, with the MSCI World ticking up by roughly 5 per cent before the crash.
It was not until 20 February 2020 that global markets began what was one of the fastest market sell-offs in financial history.
Governments and central banks around the world then promptly responded with massive monetary and fiscal support, which has allowed markets to recover and break new all-time highs.
Ultimately the best performing equity markets depended on how well individual nations and regions managed the pandemic.
Source: FE Analytics
The IA China/Greater China peer group was the highest performing sector, with the average fund delivering a total return of 51.72 per cent one year on from the market’s peak in February.
The country had a ‘first-in, first out’ experience with dealing with coronavirus and has had the chance to recover quicker than much of the world. Its stock market is also dominated by big technology firms such as Alibaba and Tencent, which fared well during the pandemic.
IA Technology & Telecommunications was the second highest performing sector, with a total return of 42.16 per cent. The sector is made up of funds focused on investing in technology companies, which have thrived and seen their products embraced during the global lockdown.
IA Asia Pacific including Japan and IA Asia Pacific excluding Japan were two notably high performing sectors. The main countries within the sector were amongst the first hit by the pandemic but were also the nations that seemed to manage the health crisis relatively more efficiently than the rest of the world.
Indeed, around two-thirds of the MSCI Asia Pacific index is made up companies listed in China, South Korea and Taiwan, which were hit earlier by the pandemic and haven’t experienced as severe second or third waves.
The IA North America sector was another high performer despite its severe health crisis and extended lockdowns. It is worth, noting, however that the sector has a high weighting to companies such as Amazon, Alphabet and Microsoft whose products and services enabled many global economies to continue as most other sectors came to a standstill.
At the other end of the table, the worst performing sectors were the IA Property Other and the UK equity sectors.
Source: FE Analytics
The average fund in the property sector lost 11.43 per cent over the period. Commercial property was hit especially hard by the pandemic and ensuing government-mandated lockdowns forcing workers to stay at home.
UK strategies have also had a tough year after the country was hit particularly hard by the pandemic, as well as the uncertainties surrounding Brexit.
The IA UK Equity Income sector came off the worst, largely due to the swath of companies cutting dividends and the high concentration of dividend payers amongst sectors such as energy, which were most severely affected by the pandemic and the oil price collapse that happened earlier in the year.
Looking at the top 20 performing individual funds, they were mostly in the global, north American, Chinese and Asia Pacific sectors.
Source: FE Analytics
The £170m Premier Miton UK Smaller Companies fund, managed by Gervais Williams and Martin Turner, was the best performer of the entire Investment Association universe with a total return of 111.08 per cent over the period. The fund profited in the sell-off from a put option on the FTSE 100 and had several individual stocks surge over the following year.
Given the severe shock the pandemic had on the UK domestic economy and the fact that UK stocks were out of favour in the eyes of many global investors, the strategy has begun to accelerate its performance after the conclusion of Brexit.
Indeed in December of last year, Williams told Trustnet that he believed the end of Brexit presented the best risk-reward ratio he has seen in his entire career.
But one notable trend in the table is the fact that almost half of the top performing funds were managed by Baillie Gifford. The firm has experienced a stellar year for many of its equity strategies.
The £7.9bn Baillie Gifford American fund is in second place on the table with a total return of 110.23 per cent a year from the 20 February 2020 crash.
The fund did well on the back of rallying share price performance from companies such as Tesla, Zoom and Shopify, of which were heavily weighted in its portfolio and are deemed to be ‘coronavirus winners’.
The £92m New Capital China Equity fund was the third strongest performer over the period, which should come as no surprise given the high returns from the Chinese equity market.
Looking at the bottom of the performance table, it mostly features Latin American and UK equity strategies.
Source: FE Analytics
The suspended LF Equity Income fund sits at the bottom with a loss of more than 60 per cent. The fund is being wound down.
The economies of Latin America were hit hard by the global health crisis and received relatively less government support compared to many of the economies of the developed world.
The $110m Brown Advisory Latin American fund was the worst performer of the non-suspended funds on the list, suffering a 29.64 per cent loss over the period.
Since Brazil is the largest country within the regional benchmarks, several Latin American strategies were also dragged down by a hefty sell-off in the Brazilian equity market.
The £312m Quilter Investors Equity 2 fund was the worst performing UK strategy on the list (aside from the Woodford fund), posting a loss of 25.09 per cent.
It has large holdings in oil giants BP and Royal Dutch Shell, both which suffered dramatically after an oil price collapse and slowing demand for energy during the crisis.