While past performance is no guide to future returns, investors will often scrutinise track records for clues as to how a fund will behave in different market conditions.
Yet few investors will have anticipated the once-in-a-century global pandemic we find ourselves in, nor the lockdown conditions it triggered.
As such, Trustnet follows up last week’s article investigating whether there was any relationship between a UK fund’s consistency of returns in the decade leading up to 2020 and its performance in this year’s tumultuous markets.
Below, we have extended the study to the major regional sectors.
IA Global
Two IA Global funds beat the MSCI World index – the most common benchmark in the sector – in eight of the past 10 calendar years, while a further 12 managed the feat in seven.
All but one of these 14 funds delivered a higher total return than the 3.87 per cent losses from the sector so far in 2020. The one laggard is the most consistent active fund of the lot: Merian Global Equity, which beat its benchmark in eight of the past 10 years.
Performance of funds vs sector and index
Source: FE Analytics
Another fund, BlackRock NURS II Overseas Equity, failed to beat the index’s loss of 3.37 per cent so far this year – the other 12 funds topped both these benchmarks.
Every one of the 14 funds has a lower maximum drawdown than the MSCI World index so far this year, and all but three have a lower maximum drawdown than the sector average.
Notably, these three are the two funds that beat the benchmark in eight of the past 10 calendar years (Merian Global Equity and tracker Vanguard FTSE Developed World ex-UK Equity Index) and the best-performer on the list in terms of total return in 2020 – Baillie Gifford Global Discovery, which has made 25.29 per cent.
The Baillie Gifford fund holds a number of stocks which have been major beneficiaries of the shift of many physical activities online during the economic lockdown, including Ocado (shopping), Chegg (learning) and Teladoc (medical check-ups).
IA Japan
Two IA Japan funds have beaten the Topix, the most common benchmark in the sector, in eight of the past 10 calendar years, while another four achieved this feat in seven.
Five of the six funds delivered a higher total return than the sector and benchmark in 2020, with just LF Morant Wright Nippon Yield falling short.
Performance of funds vs sector and index
Source: FE Analytics
However, just two funds – Lindsell Train Japanese Equity and T. Rowe Price Japanese Equity – have a lower maximum drawdown than both the sector and the index in 2020, while one – Legg Mason IF Japan Equity – has a lower maximum drawdown than the index, but not the sector.
IA Europe ex UK
Four IA Europe ex UK funds beat the most common benchmark in the sector, the MSCI Europe ex UK index, in nine of the past 10 calendar years, while another four achieved this feat in eight.
All but two of these funds have delivered a higher total return than the sector and index in 2020 so far – these are tracker Vanguard FTSE Developed Europe ex-UK Equity Index and TM CRUX European Special Situations.
Performance of funds vs sector and index
Source: FE Analytics
These were also the only two funds on the list with a higher maximum drawdown than the sector and index this year.
The fund on the list that has done the best in terms of limiting maximum drawdown in 2020 is Jupiter European. Mark Heslop and Mark Nichols took over from star manager Alex Darwall last October and while initially there were some concerns about whether they could maintain their predecessor’s outstanding performance – he made more than three times the gains of his sector during his time as manager between 2001 and 2019 – they appear to have passed their first major test with flying colours.
IA North America
Seven IA North America funds beat the S&P 500, the most common benchmark in the sector, in seven of the past 10 calendar years.
However, there was little correlation in this super-efficient market between long-term consistency and performance throughout the volatile conditions this year. Just three of the seven funds have delivered a total return higher than that of the IA North America sector and S&P 500 index in 2020 so far.
Performance of funds vs sector and index
Source: FE Analytics
This group did marginally better in terms of protecting capital in the initial crash. Four of the funds have a lower maximum drawdown than both the sector and index this year, one fund’s figure is lower than that of the index but not the sector, and two funds did worse on both measures.
IA Global Emerging Markets
Three IA Global Emerging Markets funds – Schroder Global Emerging Markets and the onshore and offshore versions of ASI Emerging Markets Equity – beat the sector’s most common benchmark – the MSCI Emerging Markets index – in seven of the past 10 calendar years.
It appears there is little relationship between consistency and ability to protect capital in this crisis, however.
Schroder Global Emerging Markets has lost less than its benchmark and sector so far this year, while both the Aberdeen funds lost more.
Meanwhile, the MSCI Emerging Markets index has a lower maximum drawdown than all of the funds, while the figure for IA Global Emerging Markets is higher than all three.