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50 days of lockdown: how have fund investors fared?
We’re now 50 days into lockdown in the UK and during that time, despite all else that’s been going on in the world, there has been lots of positive news for investors.
Even though there’s been plenty of turmoil to businesses, markets are rising, the vast majority of funds have delivered positive returns for investors, people have been buying up more funds and stocks, and companies have managed to raise cash.
So what have investors been buying and how have funds fared during the 50 days of lockdown?
WHICH FUNDS DID WELL?
During the 50 days of lockdown there was a polarised performance among funds, but investors will find cheer that 97% of funds have made money for investors, a sharp turnaround on the performance we saw just weeks before lockdown officially began when markets were in freefall.
Gold funds topped the best performers during the period with ES Gold and Precious Metals (B3YQ855) delivering the highest return of 57.6%, helped by investors looking to gold and gold miners in times of trouble, pushing up prices.
Technology funds have been another standout as this crisis has seen how technology has become integral to our everyday lives. Whether it’s through various video conferencing services allowing us to work and socialise, Netflix entertaining us with binge-worthy TV or Amazon delivering goods and stopping us having to go to the shops, these technology companies have prospered as they have become essential services for many.
US-focused funds have also been among the top risers, fuelled in part by this technology boom but also by the sharp rebound in American markets after falls in February and early March.
WHICH FUNDS DIDN’T DO SO WELL?
The 3% of funds that delivered a loss are dominated by property funds. The property market has all but ground to a halt during lockdown, meaning it’s almost impossible to accurately price the asset as no sales are happening.
While lots of property funds remain suspended, meaning investors are trapped, that hasn’t stopped their values falling as managers write down the value of some assets.
However, the worst performer in the lockdown period was Neil Woodford’s former equity income fund, now called LF Equity Income (BLRZQ73), which lost investors 16.7%.
The illiquid and unlisted assets in the fund had already been hit by the wider market downturns, but this fall in value really reflects the fact that investors received some of their money back on 25 March after assets were sold off so isn’t a true reflection of performance during the period.
WHAT HAVE INVESTORS BEEN BUYING AND SELLING?
Investors used lockdown to snap up bargains, with three-quarters of the deals done on AJ Bell Youinvest’s platform being purchases of assets, with just a quarter being investors selling investments from their portfolio.
Global funds dominated the purchases, including Lindsell Train Global Equity (B644PG0), Fundsmith Equity (B41YBW7) and Fidelity World (BJS8SJ3), with investors looking to get broad exposure to global markets and relying on fund managers to make the tactical decisions about where to invest.
Lots of investors also showed they had the stomach for a bit more risk despite the market sell-off earlier in March. Two special situations funds made it into the top 10 most popular funds, perhaps as individuals expect the strategy of investing in companies in crisis to profit when markets rebound.
Investors also outsourced the decision of where to allocate money, opting for a number of one-stop-shop funds, where fund managers have the ability to invest across different equity markets or asset classes, such as the Vanguard LifeStrategy funds, RIT Capital (RCP) and AJ Bell’s own funds.
For stock hunters, airlines and travel companies were popular, with investors hoping to profit from previous falls in this sector before the lockdown and clearly thinking the outlook for these companies wouldn’t be as dire as many predicted.
Oil giants featured for similar reasons, but investors will have been dealt a blow by Royal Dutch Shell’s (RDSB) large dividend cut at the end of April.