March’s top and bottom performing funds

A round up of the notable market and fund sector trends in March as markets continued to grapple with inflation fears.

This content is more than 6 months old now, please visit the news area of this site for more recent content

  1. Rob Morgan

Large technology companies, and ‘growth’ stocks more generally came under more selling pressure in March as investors continued to weigh up the possibility of vigorous global economic growth leading to higher inflation and, ultimately, interest rate rises.

Having benefitted from falling interest rate expectations over the past few years, technology and growth stocks have suddenly been confronted with a headwind and investors have changed tack. As well as questioning the value of these areas, they have been attracted to parts of the market likely to benefit from easing lockdowns and an economic recovery. I wrote more on the subject here.

Building on February’s trends, and with shares in more economically sensitive areas leading the way, ‘value’ funds were in the ascendency. Their approach leads them to cheaper, less fashionable areas of the market in search of assets trading at prices below their true worth. The UK and Japan were relatively strong – the former owing to its exposure to global commodities and energy, the latter due to its sensitivity to global manufacturing and trade.

Funds with significant exposure to technology, healthcare and other key growth areas suffered a poor month with former top performers, such as a number of Baillie Gifford funds, among the laggards. Gold and gold equities also performed poorly as the rise in global bond yields and a stronger US dollar offset higher inflation expectations.

In our view, markets will likely continue testing the resolve of the US Federal Reserve in terms of its ability to do “whatever it takes” to stimulate economic growth and employment while turning a blind eye to inflation. Therefore, some short-term volatility is to be expected. However, it’s too soon to give up on growth stocks. The forces of deflation – globalisation, technological change and the lack of negotiating power on the part of labour forces – means the constraints to output that created inflationary periods in the past may be mitigated. Excess money creation may just increase output without increasing wages and commodity prices that much – but lead to higher asset prices in general.

This is the ‘roaring twenties’ scenario that is favoured by the market optimists. This suggests that long term bond yields remain in a ‘sensible’ zone of 2-3%, reflecting the inflationary impact of the new money created and preventing overheating, but not high enough to curtail the growth engines of the global economy. Market-leading companies that have embedded relationships with their customers tend to have some helpful characteristics in terms of coping with inflation, especially if they sell mission-critical products and services or they represent a small part of a customer’s expenditure and are highly valued for quality or convenience. We therefore suggest there is merit to both ‘growth’ and ‘value’ approaches in the months and years ahead.

Although investors should be aware past performance is not a reliable indicator of future results, here are the top and bottom ten Investment Association (IA) funds and sectors* for March 2021 in full:

Top 10 funds:

Bottom 10 funds:

Top 10 sectors:

Bottom 10 sectors:

 

Past performance is not a reliable indicator of future returns. Figures are shown on a % total return basis, bid to bid price with net income reinvested; Source: FE Analytics, data for March 2021: 28/02/2021 to 31/03/2021. Onshore and retail open-ended funds only.

 

*There are around 3,000 funds on sale in the UK. The Investment Association divides these into nearly 40 ‘sectors’, broad groupings that help investors and advisers compare funds of similar types before looking in detail at individual funds.

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.

More from author

  1. Rob Morgan

    April’s most widely bought and sold funds

    Date: 5th May 2021 08:23am

    We reveal the funds most bought and sold by customers using Charles Stanley Direct in...

  2. Rob Morgan

    April’s top and bottom performing funds

    Date: 4th May 2021 17:21pm

    A round up of the notable market and fund sector trends in April as US ‘earnings seas...

  3. Rob Morgan

    Six investment pitfalls beginners must avoid

    Date: 27th Apr 2021 17:51pm

    If you are just getting started in investing there are a few things you should learn ...

Most read articles

  1. March’s top and bottom performing funds

    April’s most widely bought and sold funds

    Date: 5th May 2021 08:23am

    We reveal the funds most bought and sold by customers using Charles Stanley Direct in...

  2. March’s top and bottom performing funds

    April’s top and bottom performing funds

    Date: 4th May 2021 17:21pm

    A round up of the notable market and fund sector trends in April as US ‘earnings seas...

  3. March’s top and bottom performing funds

    How Europe can be a dynamic place to invest

    Date: 22nd Apr 2021 08:49am

    This European fund has beaten the S&P 500 over 1, 3 and 5 years despite European mark...

Investment involves risk. You may get back less than invested.