Some of the worst performing funds of the global financial crisis have generated strong returns for investors who stayed invested over the following decade, according to research by FE Trustnet.
In the 10 years since the crisis began on 9 August 2007 the market has changed significantly, with policies enacted to help shore up the financial system only just now beginning to unwind.
A decade ago, as the extent of the crisis became clearer, markets slumped as confidence collapsed and investors sought safe havens for their money.
Indeed, many fund managers themselves bore the brunt of the impact as holdings saw big falls in valuations.
Around 43 per cent of existing funds in the IA universe with long-enough track records delivered a negative return during 2007/2008, including 20 funds that recorded a loss of 50 per cent or more.
The worst hit sector was IA UK Smaller Companies, which fell by 44.27 per cent. It was joined at the bottom by the IA Property sector, down by 40.32 per cent, and IA UK All Companies, which lost 30.7 per cent.
Below FE Trustnet revisits some of the worst performers of 2007/2008 and considers how they have fared since.
For the purposes of this study we have considered the worst performing funds between 1 January 2007 and 31 December 2008 and how they would have performed in the period since ending 31 August 2017. The study does not include funds that have since closed.
Aberdeen Property Share
The worst performing fund during the period under review was Aberdeen Property Share, which fell by 67.09 per cent during the period under review.
The five FE Crown-rated fund is managed by the asset manager’s pan-European equity team and invests mostly in UK property companies. Since 31 December 2008, the fund has delivered a 185.68 per cent gain.
Performance of fund vs benchmark since 2008
Source: FE Analytics
So far this year, the £350.4m fund has delivered a total return of 11.77 per cent compared with a rise in the FTSE 350 Real Estate Investment & Services index benchmark of 9.58 per cent.
Majedie UK Smaller Companies
Another fund badly hit during the two-year period was Majedie UK Smaller Companies, which fell by 61.23 per cent. The fund also underperformed the Numis Smaller Companies plus AIM (ex Investment Companies) index benchmark, which returned 50.61 per cent.
However, since the crisis the UK small-cap fund has returned 284.16 per cent, slightly behind the 297.79 per cent return for the benchmark.
The fund was taken over by Richard Staveley in May 2014 and has made a 22.34 per cent total return under his stewardship although it still trails the benchmark’s 33.11 per cent rise.
In 2017, the fund has risen by 14.26 per cent, compared with a 16.25 per cent rise in the benchmark.
SVM UK Opportunities
Despite recording significant losses during the period under review, the SVM UK Opportunities fund has been one of the best performers since.
The IA UK All Companies fund lost 58.07 per cent between 2007 and 2008, compared with a fall of 26.2 per cent for the benchmark FTSE All Share index.
It is managed by Neil Veitch, who has been with the fund since 2006, and was joined by deputy manager Craig Jeruzal in January 2014.
Since 31 December 2008 the fund has returned 410.11 per cent, compared with a 151.91 per cent gain for the benchmark.
The fund has risen by 9.53 per cent in 2017, compared with a 7.82 per cent rise in the benchmark and a 9.06 per cent rise for the average IA UK All Companies fund.
Performance of fund vs benchmark YTD
Source: FE Analytics
“The UK economy is the only major economy where growth has faltered this year,” the managers noted in the most recent fund factsheet. “Worries over Britain’s future relationship with the EU have likely contributed to the slowdown and will continue to have an impact.
“The ongoing uncertainty, however, will keep any potential increase of rates by the Bank of England on hold, providing support to equity markets.”
JPM Russia
A number of Russian funds struggled during 2007-2008, most notably JP Morgan’s Russia fund. The fund fell by 57.84 per cent underperforming the MSCI Russia 10/40 index, which dropped by 48.55 per cent over the same period.
The JPM Russia fund has lagged over the intervening period, however, with its total return of 150.39 per cent underperforming the 172.73 per cent return by the index.
Co-manager Oleg Biryulov has been with the fund since 2009, he was joined by Habib Saikaly and Pandora Omaset in July this year.
Year-to-date, the fund has fallen by 2.71 per cent compared with a drop in the benchmark of 7.02 per cent.
Henderson Horizon Pan European Property Equities
The property sector was particularly badly hit during the crisis given this part of the market was the catalyst for the sell-off and investors sold out as valuations came under increased scrutiny.
The last fund on the list is the Henderson Horizon Pan European Property Equities, which aims to have at least 75 per cent of its total assets in European property equities or Reits.
The fund fell by 56.52 per cent during 2007/2008 compared with a fall of 49.77 per cent for the benchmark FTSE EPRA/NAREIT Developed Europe index.
However, since the crisis the fund had returned 213.14 per cent and outperformed the 196.72 per cent gain recorded by the index.
The fund is now managed by Guy Barnard who joined the fund in September 2010 and has returned 17.37 per cent in 2017.