The extremely volatile conditions of recent weeks have bruised investors with just under 95 per cent of the funds in the Investment Association universe making a loss since markets peaked on 19 February.
With the sell-off hitting equities, bonds, alternatives and commodities, few funds have been untouched. Indeed, as the chart below shows, IA UK Gilts and IA Short Term Money Market are the only two sectors to make a positive average return between the market’s peak and 26 March.
Total return of sectors between 19 Feb and 26 Mar
Source: FE Analytics
These heavy falls have dramatically changed the return profiles of investment funds.
FE fundinfo data shows that in the five years to 19 February, just 43 funds in the Investment Association universe had made a loss as investors rode what turned out to be the tail-end of a strong bull market
However, jump forward little more than one month and the picture is very different: thanks to the coronavirus crisis, 678 funds are now showing a negative total return for five years to 26 March.
In nominal terms, much has changed for the investor. The below table shows the average return for the 39 Investment Association sectors over the five-year periods to the market’s peak and a month into the sell-off.
As can be seen, 60 percentage points have been shaven off the five-year return of the average IA UK Smaller Companies fund because of the recent market crash, while IA North American Smaller Companies, IA European Smaller Companies, IA North America, IA UK All Companies and IA Technology & Telecommunications have lost more than 40 percentage points.
Source: FE Analytics
As would be expected, IA UK Gilts and IA Short Term Money Market are the only sectors to witness an improvement in their five-year numbers.
So the crash obviously looks bad for investors in an absolute sense, but how are funds holding up relatively? To gauge this, Trustnet ran the numbers to find out how individual funds’ quartile rankings changed between the two five-year periods under consideration.
The headline findings of this analysis can be seen in the following matrix. It shows funds’ quartile rankings (so sectors such as IA Specialist and IA Targeted Absolute Return have been removed) and how they have changed between the two periods.
What we can see is that most funds are still in the same quartile of their respective peer group that they were before the sell-off. For example, of the 540 top-quartile funds before the sell-off, 418 are still there over five years now; likewise, 414 funds haven’t moved out of the bottom quartile.
Source: FE Analytics
However, nine funds have seen a significant change in their quartile ranking over the two five-year periods: five have jumped from the fourth quartile to the first while four have tumbled from the top to the bottom.
The team-managed NB Short Duration Emerging Market Debt fund is the largest of the five to move from the bottom to the top of its sector, with assets under management of £5.1bn. It’s a member of the IA Global EM Bonds - Hard Currency sector.
The £3bn LF Ruffer Total Return fund is a well-known member of the IA Mixed Investment 20-60% Shares sector and its cautious positioning might have held it back in the bull run but has served its investors well during the sell-off.
Virgin Money Bond and Gilt, Allianz Global Fundamental Strategy and Barclays Wealth Global Markets 1 are the other funds to jump up the five-year rankings.
The four that have from the top to the bottom of their sectors, however, are L&G High Income Trust, Artemis High Income, Quilter Investors Cirilium Conservative Portfolio and TB Wise Multi-Asset Income.