The best and worst performing funds of 2019

Technology, gold equities and smaller companies were the areas that came out on top over the year.

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  1. Rob Morgan

Global share markets enjoyed a strong year despite the backdrop of prevailing uncertainty of the trade war between the US and China. Markets favour harmonious trade relations and although for much of the year an accord seemed far from certain, the nations did ultimately agree a ‘phase one’ agreement. This was enough to push the major US stock indices to record highs and was positive for North American funds. Technology specialists were also particular beneficiaries, but a wide range of sectors and geographical areas had a strong year.

It was a year of two parts in terms of which investment ‘style’ worked best.  Earlier on, it was ‘growth’ funds – those invested in companies perceived to have superior prospects for multiplying their earnings – that flourished. Towards the end of the summer, though, there was a marked shift. Growth funds stuttered and ‘value’ investments started to do better. These buy shares in more unloved companies and sectors that the managers believe are cheaper than they should be in the expectation that the anomaly will correct.

Many UK funds enjoyed a mid-December surge following the result of the general election. Those investing in areas related to the UK economy rather than overseas were the chief beneficiaries, including a number of medium-sized and smaller companies funds as investors perceived that UK domestic political risk was receding and the economy poised to benefit from upcoming fiscal stimulus. Investors revisited some of the cheaper sectors – notably, housebuilders, banks and utilities –  after internationally-facing stocks benefitting from global growth led the way in the early part of the year.

The gold price surged during the summer months as expectations of interest rate cuts by the US Federal Reserve grew. Gold doesn’t pay any income, and there is less ‘opportunity cost’ for holding it versus traditional safe havens such as bonds and cash when interest rates are low. The bullion price, along with gold equity funds, fell back as signs of more easing from the Fed faded.

Relatively few funds lost value over 2019, less than 2%, and there were only a couple of Investment Association sector averages that produced a negative return. UK Direct Property was one. It was a difficult year UK commercial property with uncertainty over Brexit, retail assets under pressure from increasing online shopping and the advent of less favourable tax regime for overseas owners of UK property assets. Indeed, the sector saw considerable outflows of investor money and one fund had to suspend trading – there’s more on this subject, and the ‘illiquidity’ inherent in the asset class, here.

Other laggards included more conservative areas such as high-quality bonds, though they still produced a decent return, while many of the worst performers were in more specialist areas such as energy or commodities. Indian equities were hit by growth estimates for the nation’s economic growth being cut – though weakness in India-focused funds was primarily down to a weak currency as opposed to equity market moves.

It has, of course, been a terrible year for the UK’s most well-known fund manager. Neil Woodford’s Woodford Equity Income (renamed LF Equity Income), still suspended and now being wound down under new management, is among the worst performers despite a bounce in the UK market following the general election. We will keep investors in this fund updated with further developments as they emerge.

The worst performer, VT Garraway Absolute Equity, is a more specialist fund that was also challenged by redemption requests and in the process of being wound down.

Table: top performing funds of 2019 to date

Onshore, retail unit trust / OEIC funds only; Source: FE Analytics, bid to bid total return basis, 31/12/2018 to 19/12/2019

Table: top performing sectors of 2019 to date

Source: FE Analytics, bid to bid total return basis, 31/12/2018 to 19/12/2019

Table: bottom performing funds of 2019 to date

Onshore, retail unit trust / OEIC funds only; Source: FE Analytics, bid to bid total return basis, 31/12/2018 to 19/12/2019

Table: bottom performing sectors of 2019 to date

Source: FE Analytics, bid to bid total return basis, 31/12/2018 to 19/12/2019

Past performance is not a reliable guide to future returns. This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus. If you are unsure of the suitability of your investment please seek professional advice.

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