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The best and worst performing funds since the global financial crisis

09 August 2017

Investors continue to feel the impact of the financial crisis a decade after it began, but which funds have thrived since then and which have struggled?

By Rob Langston,

News editor, FE Trustnet

Funds exposed to the biotechnology and technology sectors have performed the best in the decade since the global financial crisis began, while natural resources-focused funds have struggled to bounce back, FE Trustnet research has revealed.

The global financial crisis, which is said to have begun on 9 August 2007 after French bank BNP Paribas froze two funds exposed to the US sub-prime mortgage market via mortgage-backed securities, had a huge impact on investors.

“While problems in this market had been growing since house prices there began to top out in 2006, the announcement has been identified by many as a milestone,” noted Capital Economics chief market strategist John Higgins.

The subsequent ultra-low rate environment and quantitative easing have become a normal part of monetary policy over the past 10 years, but were unprecedented at the time.

The crisis and coordinated efforts to prop up the financial system have had a number of ramifications for markets. Only now, 10 years after the crisis began, are central banks starting to consider significantly raising interest rates.

As Schroders’ David Brett noted earlier this week: “Banks failed, government institutions were bailed out, stock markets crashed and countries had to be propped up financially.

“We are still feeling the effects: low growth, political upheaval, Brexit and even the election of Trump can all be traced back to the crisis.”

Notably, the banking sector has struggled to accommodate higher liquidity requirements and is just now beginning to return to normal: the UK government having offloaded its stake in nationalised bank Lloyds in recent years (although it retains a majority holding in Royal Bank of Scotland) and US banks recommencing dividends and buybacks.

It has also been a difficult time for fund managers. In the year following the start of the crisis, the FTSE 100 fell by 9.1 per cent, while the S&P 500 dropped by 4.1 per cent.

Yet some managers and strategies have thrived in the decade since the crisis, while other have failed to bounce back.

Below, FE Trustnet considers the best and worst performing open-ended funds during the past 10 years.


Source: FE Analytics

The best performing fund since the financial crisis is the IA Specialist fund Candriam Equities L Biotechnology, which has returned 576.99 per cent in the 10 years to 8 August.

The $750.2m, three FE Crown-rated fund has been managed by Rudi Van Den Eynde since 2000. It invests in biotechnology companies and related activities.

Although the fund invests globally, most of its assets are invested in the US, given the “innovative history of the US biotechnology sector”.

Performance of fund vs sector over 10yrs

 

Source: FE Analytics

The Candriam fund is joined at the top by another biotechnology fund: AXA Framlington Biotech, which has risen by 421.9 per cent over the same period.

Other top performers include Legg Mason IF Japan Equity (386.03 per cent), Pictet Digital (333.57 per cent) and Polar Capital Global Technology (316.05 per cent).

A number of technology funds have boasted top performance over 10 years and IA Technology & Telecommunications is the best performing sector, with the average fund rising by 233.79 per cent. Blue chip technology stocks have been among the best performers in recent years, particularly in the US, as investors have sought out stocks with the greatest growth potential.

Other top-performing funds over the period have been more regional-focused smaller companies vehicles.


Source: FE Analytics

The worst performer over 10 years is the MFM Junior Oils Trust, which has fallen by 55.83 per cent over the past decade.

The £11.5m fund has been managed by Angelos Damaskos since 2004. It invests in small- and mid-cap stocks specialising in oil exploration and production.

The financial crisis saw global growth slow significantly, affecting demand for oil. More recently, prices have dropped to record lows as demand has fallen away and new technology has opened up reserves of shale oil for production.

Performance of fund vs sector over 10yrs

Source: FE Analytics

It is joined at the bottom by Manek Growth, which has lost 49.56 per cent. The £9.2m fund aims to achieve long-term capital growth by investing primarily in UK equities. It has been managed by Jayesh Manek since 1997.

Other funds recording a negative total return include Schroder ISF Global Energy (down by 33.74 per cent), Aviva Investors European Property (which has fallen by 32.4 per cent), and JPM Natural Resources (down by 20.53 per cent).

It should be noted that many poor performing funds may have been closed during the 10-year window.

Aside from the money market sectors, the IA sector with the lowest average is IA Property, which has risen by just 22.32 per cent. The property sector was one of the hardest hit by the financial crisis as investors avoided the asset class amid concerns over valuations.

Natural resources funds are also more prevalent at the bottom of the performance tables over 10 years. The slowing of global growth has affected demand for commodities, although improving sentiment has had a positive effect for some funds more recently.

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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.