There is a gap of more than 200 percentage points in the three-year returns of the best and worst funds in the Investment Association’s most divergent sector, Trustnet research has found.
The past three years have thrown many headwinds at investors, including the Covid pandemic, the war in Ukraine, surging inflation and the end of the ultra-loose monetary policy era.
Against this backdrop, many funds have struggled. FE fundinfo data shows that 779 funds out of the 4,432 in the Investment Association universe – or 17.6% – have posted a loss over the past three years.
But some have thrived, with 2,135 (or 48.2% of the universe) up more than 20%. What’s more, 20 of these have made a three-year total return in excess of 100%.
In some sectors, there has been a massive difference in how funds have navigated the ups and downs of the past three year so, in this research, Trustnet has identified the differences between each sector’s best and worst funds.
It might not be too surprising that the IA Specialist sector is the one with the biggest divergence in performance, given that the peer group is home to a wide range of funds with different investment focuses and approaches.
Performance of best and worst IA Specialist funds over 3yrs
Source: FE Analytics
Our data shows that the best fund in the IA Specialist sector over three year is GS North America Energy & Energy Infrastructure Equity Portfolio, which is up 114%.
This is a massive 212 percentage points ahead of the sector’s weakest fund: JPM Emerging Europe Equity. It is down 98.8% because of its exposure to Russian equities, which have been frozen out of much of the global stock market; the fund was suspended after Russia’s invasion of Ukraine.
Source: FE Analytics
While investors might expect there to be such as big difference in returns in this varied peer group, they might be more surprised to see the IA Global sector – which is the largest in the Investment Association universe – in second place.
Schroder ISF Global Energy has made 151.4% over the past three years, on the back of the steep rises in the price of oil and gas. Baillie Gifford Global Discovery, on the other hand, has lost 31.4% after growth stocks were hammered by rising interest rates.
There are four funds in the peer group that have made more than 100% over the period under consideration: Schroder ISF Global Energy is joined by L&G Battery Value-Chain UCITS ETF, Luxembourg Selection Fund - Active Solar and SSGA SPDR MSCI World Energy UCITS ETF.
Meanwhile, the heaviest losses have come from growth strategies such as GAM Star Worldwide Equity, GAM Disruptive Growth and SVS Aubrey Global Conviction, which are next to Baillie Gifford Global Discovery at the bottom of the table.
Given that commodities have had such a strong run of late, it might appear odd that the IA Commodity/Natural Resources is towards the top of the above this. However, this is down to WS Charteris Gold & Precious Metals being an outlier by losing 8.3% – the next worst fund (Pictet Water) is up 37.9%.
Fund selection was important in the IA Targeted Absolute Return sector. Jupiter Flexible Macro has lost 23.1% over three years while another 13 funds join it in negative territory.
Performance of best and worst IA UK All Companies funds over 3yrs
Source: FE Analytics
In the IA UK All Companies sector, there are exactly 100 percentage points between the best and worst funds. At the top of the leaderboard is abrdn UK Value Equity with a 90.1% total return, while Jupiter UK Mid Cap’s 9.8% loss puts it at the bottom.
Value strategies have performed well in this sector, which is the second largest in the Investment Association and a mainstay of most UK-based investors’ portfolios. Invesco UK Opportunities (UK), Schroder Recovery and VT Cape Wrath Focus are all up more than 75%.