Fund performance during the first quarter of the year was very much a story about what happened in March as the coronavirus outbreak became a pandemic and economies around the world went into lockdown.
While markets experienced some growth in January and the start of February, all of this was undone in March as the unprecedented effect of the coronavirus pandemic caused huge falls in markets.
Although governments responded with substantial monetary and fiscal policy support, it remains to be seen what the lasting economic impact will be.
As such, quarterly performance was very much informed by how funds fared in March.
Source: FE Analytics
Like March, IA UK Gilts sector was the quarter’s top performing peer group with an average total return of 7.32 per cent. It was followed by the IA UK Index Linked Gilts where the average strategy returned 5.27 per cent.
Other fixed income strategies such as IA Global Bonds, IA Sterling Corporate Bond and IA Sterling Strategic Bond sectors also featured among the best performers.
The best performing equity peer group was IA China/Greater China with a loss of 6.15 per cent. While the epicentre coronavirus was in China’s city of Wuhan, it was the first country to go into lockdown and has seen the number of cases and death rate fall dramatically.
Source: FE Analytics
At the other end of the table, UK equity strategies were among the worst performers over the quarter led by the more domestically focused IA UK Small Companies sector, which made a loss of 30.01 per cent this quarter.
Meanwhile, the IA UK Equity Income sector lost 28.25 per cent and the IA UK All Companies lost 27.98 per cent.
On an individual fund basis, just 272 funds in the IA universe of more than 4,000 made a return of 0 per cent or more during the quarter.
The quarter’s best performer was FE fundinfo Alpha Manager Barry Norris’ FP Argonaut Absolute Return fund – which was also last month’s best performer – with a gain of 22.64 per cent for the quarter.
The top-20 is dominated with by ‘safe haven’ government bond strategies, such as ASI Sterling Long Dated Government Bond and MFS Meridian US Government Bond.
Source: FE Analytics
An exception to this was the Matthews China Small Companies fund which made 17.88 per cent over the quarter. Managed by Tiffany Hsiao, the fund invests a third of its portfolio in China’s ‘next global champions’ while the remainder is made up of ‘steady compounders’ – companies based in consumer and lifestyle staples creating a quality growth portfolio.
Source: FE Analytics
The bottom of the table, however, was dominated by global energy funds and Latin American strategies.
Energy strategies have struggled in the face of an oil price war started by Saudi Arabia at the beginning of March and compounded by the coronavirus impact on the global economy, which will slow as governments order their citizens indoors.
As such, the worst performing fund was the Schroder ISF Global Energy fund with a loss of 60.83 per cent. Other notable loss-making energy strategies included MFM Junior Oils Trust, Guinness Global Energy and GS North America Energy & Energy Infrastructure Equity Portfolio.
Latin American strategies struggled as the Brazilian market – the largest constituent of regional benchmarks – took a tumble as concerns over the coronavirus impact and the lack of room for a robust policy response spooked investors.
As such the HSBC GIF Brazil Equity fund was down by 48.06 per cent and JPM Brazil Equity lost 46.35 per cent. Other broad Latin American strategies were also down such as Janus Henderson Latin American and Invesco Latin American.
The worst performing UK strategy over the quarter was value fund ASI UK Recovery Equity, which was down by 51.01 per cent.