Skip to the content

The best and worst funds in the January bear market sell off

02 February 2016

FE Trustnet reveals what funds have made and lost the most cash since the start of the year in what has been a highly volatile period for global markets.

By Daniel Lanyon,

Senior Reporter, FE Trustnet

The Invesco Korean Equity fund was the best performing portfolio in the whole universe of the Investment Association during the highly volatile month-long start to 2016, according to research by FE Trustnet.

With a hefty 12.46 per cent return in 2016, the niche fund was the best place to be for investors during a period that saw many markets move into bear market territory although it should be noted this is short time period and the fund has been highly volatile in the past decade.

January’s sell off was caused by worries over the falling oil price and its implication of weakening global growth which heightened fears that led to several substantial sell-offs in global stock markets.

As per previous periods of a ramp up in bearish sentiment, it was funds investing in the safest parts of the bond market such as gilts, safe havens such as gold and those with long/short mandates that fared best in January 2016.

The £33m Investec Global Gold fund and the £212m Jupiter Absolute Return fund also make onto the top 10 performing funds in 2016.

 

Source: FE Analytics

Gold miners had a strong start to the year with many of the biggest names such as Randgold Resources, Fresnillo bucking the trend in equity markets and making strong gains,


This was due to a bounce back from the selling of these shares and a modest recovery in the gold price since December 2015 and the reason for the Investec Global Gold fund’s bounce after several years of losing cash.

Performance of stocks and index over 6 months

Source: FE Analytics

Gilts and other government bond funds did very well over this period, says Charles McKenzie, head of fixed income at Fidelity, despite many predicting that they were overly priced and therefore due a sell off last year.

Government bonds yields in all major markets have compressed since the start of the year, led by Treasuries and gilts, with 10 year yields close to 30bps lower,” he said

The majority of the top decile of the 2500 or so funds in the universe either directly or largely exposed to this part of the fixed income market led the way by Pimco GIS Euro Ultra Long Duration and Pimco GIS Euro Long Average and the Vanguard UK Long Gilt Duration Gilt Index.

The rally in government bonds and gold helped James Clunie, manager of £212m Jupiter Absolute Return fund to his positon at the top of the IA universe in 2016 as his largest positions are in US Treasuries and physical gold.

Coram Asset Management’s James Sullivan says that shorting the Chinese currency the Renminbi has been a very useful trade for the fund in 2016.

“His deflationary hedge theme (short renminbi) has been opportune - very much in line with our own concerns regarding deflationary headwinds emanating from Asian economies, Sullivan said.


He adds that due a continuation of this trend, Clunie’s fund should continue to do well in 2016.

“Deflationary pressures emanating from Asia – albeit not so much deflationary pressure domestically – will ensure that western central banks and governments continue to struggle to generate meaningful, if any, inflation.”

“Protecting against this deflationary scenario remains a valid trade – whether that is short the Renminbi or long sovereign debt (gilt or Treasury bills).  The ‘US import prices index’ highlights significant price deflation at -8.2 per cent year on year.  This to us remains an area of concern.”

Clunie, who has managed the £205m fund since September 2013, went ‘net-short’ in October last year for the first time since taking over the fund.

This means that the manager has more exposure to short positions – betting that certain stocks will fall – rather than long positons – betting that they will go up.

Since taking over the fund, Clunie has made a return of 12.35 per cent compared to the gain in the FTSE All Share’s 5.59 per cent gain. 

Performance of fund and index since September 2013

 

Source: FE Analytics


At the other end of the scale, biotech has been the worst place to be in 2016. AXA Framlington Biotechnology , Pictet Biotechnology, Candriam Equities Biotechnology all lost more than 15 per cent as the high beta nature of this part of the market showed itself.

Performance of funds and index in 2016

 

Source: FE Analytics

Lewis Grant, senior portfolio manager of the £300m Hermes Global Equity fund says longer term there are other issues hitting biotech stocks.

“A confluence of factors has weighed on sentiment towards the sector, including high drug prices and slow drug development cycles.”

However, he thinks the selling – which has been a apparent for about six months – is overdone and many stocks look cheap.

“There are some major positives such the 21st Century Cures Act which is moving rapidly through the US legislative process and will seek to promote medical innovation and accelerate drug approval process.”

ALT_TAG

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.