It was a disappointing October for investors in European equity strategies as markets failed to shrug off the Covid-19 coronavirus, although Chinese fund holders will have had a bit more to be happy about as the country continued to outperform, according to the latest data from FE Analytics.
Rising number of coronavirus cases in Europe during October saw most national lockdowns introduced and has had impacted markets.
Indeed, the Euro STOXX – a pan regional benchmark index that covers 95 per cent of the listed market capitalisation – was down by 6.36 per cent during October, in sterling terms.
It was a different story for China, as the economy continued to power ahead and keep the coronavirus under control. This benefited Chinese equity strategies and lifted other sectors with a high exposure to China, such as Asia ex-Japan.
Accordingly, IA China/Greater China was the best performing sector in October with an average return of 4.11 per cent.
Given the weight of Chinese equity market in the benchmarks, the IA Global Emerging Markets and the IA Asia Pacific sectors also performed well during the month.
The best and worst sectors of October
Source: FE Analytics
All three European equity sectors featured at the bottom of the performance table, led by the IA Europe ex UK sector which was down by 6.22 per cent.
Brexit uncertainty combined with weaker than anticipated economic data and a rising number of cases and new regional measures to contain the spread meant that UK equity strategies also featured amongst the worst performers.
“The UK economy in October is likely to have grown, but November won’t and if the spring lockdown is anything to go by coming out of the new restrictions on 2 December seems remote,” said Ben Yearsley, director at Fairview Investing. “Therefore, the final quarter of 2020 will see a contraction.
“Markets obviously look ahead so vaccines and Brexit deals could yet save 2020; it would have to be a large year-end ‘Santa rally’ though.”
On an individual fund basis, the best performers were dominated by Chinese equity strategies, making up six of the top-10 funds in October.
The top-three performing funds were all run by the same management house, GAM, two of which were China funds – GAM Multistock China Evolution Equity and GAM Star China Equity – and the best performer of the month, GAM Star Alpha Technology .
The best performing funds of October
Source: FE Analytics
The $43m GAM Star Alpha Technology fund, which was the highest return of 10.74 per cent during the month, however, it has the Chinese e-commerce giant Alibaba as its largest position, and a much lower weight towards US technology than most other tech-focused funds.
Run by Mark Hawtin since 2010, the fund’s other top positions include Intuitive Surgical, a robotic surgical product manufacturer, and Marvell Tech Group, a semiconductor firm.
The second best-performing fund is the $95m GAM Multistock China Evolution Equity fund, run by Jian Shi Cortesi, with an 8.1 per cent gain.
Its three largest holdings are in Tencent, Alibaba, and JD.com. The manager told Trustnet at the start of October that she believed Chinese tech companies weren’t as richly valued as those in the US.
Many of the other top performing Chinese equity strategies in the list all have Alibaba and Tencent in common as top conviction holdings.
One notable outlier among the top performers was the £426m LF Odey Absolute Return fund run by FE fundinfo Alpha Manager James Hanbury, which made a 6.58 per cent return and was the eighth best performing fund in October and the only absolute return fund to make the top-20.
Another fund of interest was the £53m FP Octopus UK Micro Cap Growth fund, a UK small- and micro-cap strategywhich delivered a positive return of 5.96 per cent during the month, despite Brexit uncertainty and negative sentiment surrounding the UK economy.
The worst performing funds of October
Source: FE Analytics
Whilst the majority of the worst performing funds were European strategies, three gold funds were also amongst the bottom-10, as the price of gold faltered in October.
Indeed, the price of gold as represented by the Bloomberg Gold Sub index – declined by 2.37 per cent in sterling terms over the month.
As such, the £1.2bn LF Ruffer Gold fund emerged as the worst performer after posting a 10.95 per cent loss., Elsewhere, the ES Gold and Precious Metals fund was down by 9.29 per cent loss, and the MFM Junior Gold fund lost 8.54 per cent.
However, seven of the bottom-10 funds were European strategies, including both developed and emerging Europe strategies.
The €306.7m Barings German Growth Trust, which focuses primarily on German equities, was amongst one of the worst performing funds from the region, making a loss of 9.93 per cent.