Baillie Gifford-run funds were clear winners among the industry’s biggest funds in 2020, beating the majority of the large players in a year that favoured technology-focused and China-focused funds.
After reviewing the entire Investment Association universe, Trustnet looked at the performance of the biggest funds (more than £1bn in size) in the Investment Association universe during 2020.
Below are the 25 fund giants that were ranked first quartile in their sector, sorted by performance.
Source: FE Analytics
Overall, it seems large funds fared reasonably well during the year. Amongst the 496 funds that are larger than £1bn in size and reside in a sector where rankings are appropriate, around 28 per cent were in the top quartile, whilst only 18 per cent were bottom quartile.
Of the top 25 top-performing large funds, five were in the IA North America sector, four were from IA China/Greater China, two were from IA Asia Pacific Excluding Japan and nine were from IA Global.
Owning winning technology stocks was a big driver of performance for many funds in 2020. North American funds benefitted from the region’s large weighting to information technology, which made up 36.5 per cent of the sector at the end of 2020.
The Chinese and Asia Pacific sector was a beneficiary of large weightings to information technology to some extent, where there is a 22.53 per cent and 30.46 per cent weighting respectively.
However, in China and the Asia Pacific region, many countries returned to economic normal faster than the rest of the world. This improved the relative performance of some of the more cyclical industries such as consumer products, which make up a 32.95 per cent weighting in IA China and 20.87 per cent in IA Asia Pacific.
In the IA Global sector, the top performing funds were those that were relatively overweight technology and China/Asia Pacific equities.
Looking at some of the biggest individual funds, Baillie Gifford-run funds make up five of the top 10 performing funds. The best performer was the £6.6bn Baillie Gifford American fund, managed by Tom Slater and his team; this was also the highest returning member of the entire Investment Association universe last year.
Performance of fund vs sector and index in 2020
Source: FE Analytics
The fund, which takes a long-term growth approach to investing, benefitted from being overweight many of 2020’s ‘coronavirus winners’ that are listed in the US, such as Zoom, Amazon and Netflix.
The second highest performing large fund was the Morgan Stanley US Growth fund, which also takes a long-term growth approach to investing.
As team at Morgan Stanley outlines, the strategy is “to hold a portfolio of high-quality companies we believe are well positioned over the long term, regardless of the market environment” with an “emphasis on secular growth”.
Managed by Dennis Lynch and his team, the fund benefitted from owning high performing technology stocks such as Square, the mobile financial services tech platform, as well as e-commerce companies Amazon and Shopify.
The highest performing China-focused strategy on the list is the £1.2bn Allianz China A-Shares fund, managed by Chao-Yang Chung and Sui Ki Anthony Wong, which came in eighth with a return of 68.75 per cent.
The managers also take a long-term growth approach to investing, but interestingly run an underweight position in technology firms relative to the benchmark MSCI China. It is instead overweight industrials, consumer discretionary and consumer staples.
The fund’s largest three holdings are in hydraulic machinery manufacturer Jiangsu Hengli Hydraulic, insurance firm Ping An Insurance Group and investment bank Citic Securities.
The £2.2bn Baillie Gifford Pacific fund on the other hand, run by Roderick Snell and Ewan Markson-Brown, is overweight Asian technology firms. Some of its top holdings are in SEA Limited, the Southeast Asian gaming and e-commerce platform, and Chinese e-commerce platforms JD.com and Alibaba.
It also has a large position in Taiwan Semiconductor Manufacturing Company (TSMC), one of the world’s largest sellers of wafers and chips, which is poised to grow in line with the proliferation of technology.
The fund’s sixth largest holding is in Samsung SDI, the Korean-listed battery manufacturer. Reliable energy storage is seen to be at the heart of the shift towards renewable energy and sustainable investment, so this company benefitted from this trend that was reinforced in 2020.
Some of the industry’s largest funds, however, did not make it to the top quartile in 2020. The £23bn Fundsmith Equity fund ranked second quartile in the IA Global sector with a return of 18.29 per cent during 2020.
Terry Smith’s quality growth fund was hit hard by its holdings in Amadeus and InterContinental Hotels, after the abrupt halt of travel that hit airlines and hotels badly during the year.
Performance of funds vs sector and index in 2020
Source: FE Analytics
Elsewhere, the £8.3bn Lindsell Train Global Equity fund, run by Nick Train, Michael Lindsell and James Bullock, underperformed in 2020 coming in the third quartile of the IA Global sector with a return of 11.73 per cent.
In the UK, Nick Train’s £6.3bn LF Lindsell Train UK Equity fund came in second quartile within the IA UK All Companies sector, with a loss of 2.47 per cent for the year.
Beaten down by coronavirus, economic lockdowns, and Brexit, the UK equity market was one of the worst performers in 2020. All but four of the largest funds in the IA UK All Companies sector had negative returns for the year.
The £1bn MI Chelverton UK Equity Growth fund was the top performing large fund with a 2020 return of 15.93 per cent.
The other three UK positive returning funds for the year were: the £3.4bn Merian UK Mid Cap fund with a return of 10.83 per cent, the £1.5bn CFP SDL UK Buffettology fund with a return of 3.85 per cent, and the £2.3bn Royal London Sustainable Leaders Trust with a return of 3.27 per cent.