Energy strategies and funds investing in UK equities made some of the biggest losses last week, after mounting concerns about the coronavirus outbreak sparked a global sell-off. 
Stock markets have just had their worst week since 2008, prompted by signs that the virus is now spreading at a significant pace outside of China, where it originated. Italy and South Korea were especially in the headlines as their case numbers grew.
The MSCI World index posted a total return loss of 9.54 per cent last week, with the FTSE 100 and S&P 500 both being down more than 10 per cent. Government bonds rose as investors tilted portfolios into safer havens.
Russ Mould, investment director at AJ Bell, said: “It is official: this is worst week for the UK stock market since the global financial crisis. The FTSE 100 has dropped 11.1 per cent (or 823 points) on the week to 6,580, the third worst weekly showing for the index since records began in 1984.
“Fears over the coronavirus spreading around the world have caused mayhem on the markets, leaving investors holding their head in their hands as large chunks are wiped off people’s savings pots. So why have markets fallen so much? It’s down to fears that the coronavirus could lead to a global recession.”
Source: FE Analytics. Total returns in sterling, between Mon 24 Feb and Fri 28 Feb 2020
The table above shows the average total returns of the 15 Investment Association sectors that made the biggest losses last week and it’s clear just how hard the UK was hit by the sell-off.
Funds in the IA UK Smaller Companies sector made the highest average loss, with the other two UK equity sectors not far behind. The US and the technology sectors (which has a high weighting to the US) also suffered.
Sectors closer to the outbreak, which started in China’s Hubei province (this is still where the majority of cases are found), fared somewhat better last week.
The average fund in the IA China/Greater China sector was down 3.55 per cent, with the IA Asia Pacific Excluding Japan lost 5.76 per cent.
Only five fund sectors were in positive territory: IA UK Index Linked Gilts (2.34 per cent), IA UK Gilts (1.57 per cent), IA Global Bonds (0.71 per cent) and the two money market peer groups.
Source: FE Analytics. Total returns in sterling, between Mon 24 Feb and Fri 28 Feb 2020
Turning to how individual funds performed last week, FE Analytics shows that energy funds suffered some of the biggest falls. This reflects concerns that investors have about the global economy, with the price of commodities such as oil falling in expectation of lower growth rates.
The Schroder ISF Global Energy fund made the Investment Association’s largest loss, shedding 20.23 per cent over the course of the week in questions.
Falls of more than 14 per cent were also posted by the likes of MFM Junior Oils Trust, TB Guinness Global Energy, GS North America Energy & Energy Infrastructure Equity Portfolio and BlackRock GF World Energy.
SVM UK Opportunities – a member of the IA UK All Companies sector – was hit with the second biggest loss, however. This fund has around 40 per cent of its portfolio in cyclical stocks while Ryanair is its second largest holding.
Neil Veitch, the fund’s manager, said: “The outbreak of Covid-19 has caused panic in equity markets worldwide, with travel and leisure stocks particularly affected. The SVM UK Opportunity fund’s overweight position in aviation stocks has been a significant negative contributor to performance over the past week.
“While the volatility of the sector is well-known and can be hugely frustrating at times like this, we remain convinced of its longer-term attractions and believe our holdings are well placed to outperform over upcoming years.”
In total, 3,651 funds out of the 4,000 in the Investment Association universe – or 91.3 per cent – made a loss last week. Some 878 funds – or 22 per cent – were down 10 per cent or more.
Source: FE Analytics. Total returns in sterling, between Mon 24 Feb and Fri 28 Feb 2020
Some funds did manage to eke out some gains last week, however, and the 25 best performers can be seen above.
The fund in the top spot - VT Clear Peak Capital UK Long/Short Equity – is a relatively new offering, having only launched in July 2019. As its name suggests, the ability to ‘short’ the UK market (or bet that it will fall) will have been an advantage.
Fixed income’s defensive properties are shown in the number of bond funds that made a positive return last week. These include Vanguard Japan Government Bond Index, Pimco GIS Euro Long Average Duration, Schroder ISF Global Inflation Linked Bond, Standard Life Investments Global Bond and AXA World Funds Global Inflation Bonds.