Skip to the content

A UK fund tops the performance tables year on from Covid-19 crash

23 March 2021

Trustnet looks at how markets have performed a year on from the bottom of the coronavirus sell-off.

By Eve Maddock-Jones,

Reporter, Trustnet

One year ago, markets reached the bottom of one of the steepest sell-offs in history as investor panic about the coronavirus pandemic reached fever pitch. Since then, stocks have gone through an exceptional rally with the strongest one-year performance on record.

The March 2020 sell-off was triggered by investor panic over the impact of the spreading coronavirus, creating a rush for liquidity.

Looking at the selloff between February 19 – the previous peak - and March 23 the nosedive in markets is clear.

Performance of indices 19 Feb to 23 Mar 2020

 

Source: FE Analytics

But since then markets have rallied considerably and many have not only recovered from the coronavirus losses but have surpassed previous highs.

Performance of indices since 23 Mar 2020

 

Source: FE Analytics

While markets are currently going through a rotation into more value and cyclical areas, due to the expected recovery, it was technology and growth stocks which led the majority of the post-Covid rally.

Teodor Dilov, fund analyst at interactive investor, said that the performance of mega-cap US names could not be understated in the recovery.

He said: “It is also true that the recovery in the UK market does not quite mirror the pace of advance on the other side of the pond.

“The influence of the outperformance of the tech sector over last year cannot be denied, with the outperformance of the so-called FAANG stocks (Facebook, Amazon, Apple, Netflix and Alphabet’s Google) turbocharged the US market and the portfolios investing in them.

“The recent volatility we have seen in the tech sector again illustrates the importance of portfolio diversification – and is another reminder that one year’s winners might not be tomorrow’s.”

A look at the Investment Association sectors’ performance over 12 months shows smaller companies make up the top of the table, with the IA North American Smaller Companies coming through as the best performer with an average return of 88.07 per cent.

 

Source: FE Analytics

 

Second is the IA UK Smaller Companies sector (84.13 per cent) and then the IA European Smaller Companies (70.34 per cent).

The IA North America and IA China/Greater China sectors, which led the rally for the large part in 2020, are further down the list, returning 52.18 per cent and 45.35 per cent respectively.

Darius McDermott, managing director of Chelsea Financial Services, said: “Stock market recoveries happen when investors are more optimistic about the future and believe that things are improving. Sometimes they occur earlier – when things stop getting worse.

“Smaller companies are considered higher risk. As investors become more confident in the future, they are happy to take on higher risk assets and therefore allocate more to smaller companies.”

The other end of the table is made up of bond and gilt sectors, with the IA UK Gilts sector has faring the worst during the last 12 months.

 

Source: FE Analytics

Bond sectors have been pushed further down performance tables by the recent sell-off as investors anticipated higher inflation caused by a strong economic recovery.

McDermott said: “High yield bonds are more economically sensitive than other parts of the bond market. As the economic picture improves, the chances of high yield companies going bust reduces and investors get more confident, allocating more money their way.”

Moving onto individual funds and the best performer since the lows last year is the four FE fundinfo Crown-rated Premier Miton UK Smaller Companies fund, with a total return of 192.78 per cent.

 

Source: FE Analytics

The £245.9m fund has been run by Gervais Williams and Martin Turner since launch in 2012. It aims to grow capital long-term, with an average holding period of five years for its stocks.

Seeing anything UK at the top of a performance table would have been rather jarring for the majority of 2020 as the UK market struggled to rally as strongly as other equity markets.

The UK had been continually out of favour since the Brexit referendum in 2016 and being a predominantly cyclical market was not the ideal choice in rallying growth market.

Indeed, many of the sectors dominating the UK were some of the hardest hit by the pandemic and businesses within them bearing the brunt of lockdown restrictions.

But since ‘Pfizer Monday’ in November, when various Covid-19 vaccines were announced, the popularity of the UK and other value markets began to shift as a legitimate vaccine allowed some speculation at life post-Covid.

Since then markets have rotated even further into value and the UK has seen a marked increase in investor inflows.

According to the Calastone Fund Flows Index, UK equity funds enjoyed their first inflows since May last year in February, partly as a result of the country’s successful vaccine programme.

Other UK funds appearing high on the list are TM CRUX UK Special SituationsFP Octopus UK Micro Cap Growth, VT Teviot UK Smaller Companies and Schroder UK Smaller Companies.

Outside of UK names, the Legg Mason Royce US Small Cap Opportunity and Baillie Gifford American were two top performing funds.

Baillie Gifford American was the best performing fund from the entire Investment Association universe in 2020, as US growth and tech led the market rally for much of the year. This has reversed somewhat more recently as value came into favour.

At the bottom end of the table shows how bond and gilt portfolios struggled over the past year.

 

Source: FE Analytics

The worst performer overall was the $646.3m AQR Style Premia UCITS with a loss of 22.04 per cent.

Run by a six strong management team the fund aims to provide diversified exposure to four fundamental investment styles, value, momentum, carry and defensive, while maintaining little to no correlation to traditional markets.

Other funds which have struggled in the past year are MFS Meridian US Government Bond, Standard Life Investments Global Bond, Threadneedle Global Bond, BNY Mellon International Bond and Pictet Absolute Return Fixed Income.

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.