Six months of market mayhem – the best and worst performing funds of the year

The past six months has been a period most investors will never forget – but many would dearly like to. Markets have been on a wild ride, with the FTSE 100 index hitting a high of 7,675 in January before plummeting to a low of just under 5,000 in March.

Investors in UK markets are still sitting on heavy losses as we near the six-month marker in 2020, with the FTSE 100 index down 16%, the FTSE All Share down a similar 17% and the FTSE 250 index of smaller companies down just over 19%. In comparison the rest of the world is looking brighter, with the S&P 500 market down a more muted 3.6%, the Nikkei 225 down 5.5% and the SSE down 3.6%. The MSCI World index of global companies has delivered a much less dramatic fall of 0.5% over that time.

This is reflected in the best performing fund being Baillie Gifford American with a return of over 53%. At the other end of the spectrum is the suspended LF Equity Income fund, formerly the Woodford Equity Income fund, with a fall of 42% as assets have been sold off at depressed prices and proceeds returned slowly to investors.

Fund investors will be dismayed that UK active funds have failed to prove their worth over this time, on average. The average UK All Companies fund has delivered the same return as the FTSE All Share year-to-date, of (16.6%). In total, almost half have delivered a worse return than the index*.

No UK All Companies funds managed to achieve a positive return, with the best performance coming from ethical fund Royal London Sustainable Leaders Trust, with a 1.7% loss. It benefitted from its lack of exposure to oil and energy companies and its overweight to healthcare and technology stocks. The worst performing was value-focused ASI UK Recovery Equity, which lost investors 39.5% year-to-date.

Investors in UK Equity Income funds have fared worse, with the average fund manager losing more than the FTSE All Share and the FTSE 100 – an average fall of 18.9% year-to-date. What’s more two-thirds of funds in the sector delivered a worse return than the market*.

The worst offender was UBS UK Equity Income, with a 28% loss. The fund has an overweight to financials and energy, which has hit performance harder than its peers. On the flip side, the best performing was LF Miton UK Multi Cap Income, with a 6.5% loss.

However, a bright spot for investors is Stateside, where active managers have managed to outperform markets on average. Usually the US market is dismissed as being too efficient for active managers to outperform, but the volatile markets have proved ripe ground for fund managers. The average US fund has returned 3.6% on average compared to the S&P 500’s return of 1.4%.

Many investors will have wanted to switch to steady-eddy funds in the market volatility, hoping to mitigate their losses. But many Absolute Return funds have failed to live up to their mandate of reducing downside risk during bumpy markets. On average the sector delivered a loss over the year to date of 2% and almost two-thirds of funds have delivered a loss during the period*.

The worst of a bad bunch was Natixis H2O MultiReturns with a 23.2% loss – far more than equity markets. Argonaut Absolute Return had the highest return, at 19.8% but that’s not the performance you’d expect of an absolute return fund that’s aiming to deliver stable returns in all markets. Of the 115 funds in the sector, only 40 managed to deliver returns ranging between 2% and (2%) - more in line with what you’d expect for the sector.

Fund performance

UK All Companies

Source: FE. Performance is 1 Jan 2020 to 19 Jun 2020

UK Equity Income

Source: FE. Performance is 1 Jan 2020 to 19 Jun 2020

Absolute Return

Source: FE. Performance is 1 Jan 2020 to 19 Jun 2020

All Funds

Source: FE. Performance is 1 Jan 2020 to 19 Jun 2020

*Source: FE

These articles are for information purposes only and are not a personal recommendation or advice.