The IA Global Bonds sector was home to the largest number of loss-making funds during 2019 while more than half of the IA UK Direct Property were in the red last year, according to research by Trustnet.
Last year was a strong one for markets as investors shrugged off concerns over the US-China trade war and Brexit to send all assets higher.
Not all funds were in positive territory, however.
With fewer than 100 funds making a loss last year, Trustnet fond out which sectors were home to the largest number of loss-making funds.
Source: FE Analytics
The sector with the highest number of loss-making funds in 2019 was IA Global Bonds, where 19 strategies of a total of 182 made a loss last year, equal to 10.44 per cent of the total number.
The sector’s worst-performing fund was the €723.1m PIMCO GIS Euro Short-Term fund overseen by Andrew Bosomworth, Markus Mueller and Tobias Spandri. The fund – which invests at least two-thirds of its assets in short-duration, euro-denominated, investment grade bonds – made a loss of 5.52 per cent last year.
The IA Global Bonds sector was followed by the IA Targeted Absolute Return peer group, where 14 of 115 funds (12.17 per cent) made a loss last year. However, this is a significant improvement on 2018 when 85.8 per cent of the sector’s members made a loss.
The worst performer from the sector was BMO Global Equity Market Neutral V10, a capital growth strategy that targets volatility at 10 per cent per annum. Managed by Erik Rubingh, the £231.8m fund fell 30.12 per cent.
Another absolute return strategy making a significant loss last year was the £3.9bn Merian Global Equity Absolute Return fund – managed by Ian Heslop, Amadeo Alentorn and Mike Servent – which was down by 13.19 per cent.
It should be noted, however, that the sector is home to a range of strategies.
The peer group with the highest percentage of funds making a loss in 2019, however, was the IA UK Direct Property sector, where 56.25 per cent were in the red.
The 16-strong sector saw nine of its constituents end last year with negative returns as investors turned against the asset class. Sentiment turned as a result of the unsettled UK political outlook where a Brexit withdrawal agreement often looked impossible and concerns over liquidity were raised.
Source: Investment Association
During the first 10 months of the year, investors withdrew £1.4bn from IA UK Direct Property funds, according to the most recently updated data from the Investment Association, as the above chart shows.
The sector’s problems were brought into focus by the suspension of M&G Property Portfolio shortly before the UK general election at the end of the year.
The UK property funds making the biggest losses last year were the Aberdeen UK Property, the aforementioned M&G Property Portfolio and Aviva Investors UK Property funds, which were down by 8.04 per cent, 7.58 per cent and 7.3 per cent respectively.
While the general election result was largely positive for UK assets, it came too late in the year to have a significant impact on sentiment.
It also came too late for three strategies in the IA UK Smaller Companies sector, which also ended the year in negative territory.
LF Miton UK Smaller Companies, Elite Webb Capital Smaller Companies Income & Growth and MI Downing UK Micro Cap Growth were all loss-making in 2019.
The worst performer was the £56.9m LF Miton UK Smaller Companies fund, managed by veteran investor Gervais Williams and Martin Turner, which made a 13.99 per cent loss.
The Elite Webb Capital Smaller Companies Income & Growth fund also recorded a double-digit loss last year, falling by 10.04 per cent.
The only other mainstream sector with more than one fund making a loss last year was the IA UK All Companies sector which had two members in the red during 2019. Both have a greater focus on the value style of investing that has been out-of-favour for much of the past decade but enjoyed a resurgence late last year.
The first was the £130.4m ASI UK Recovery Equity, overseen by Adam Hunt, which was down by 9.69 per cent over the year. Meanwhile, Rod Oscroft’s £96.9m L&G UK Alpha Trust lost 2.74 per cent.
Finally, there were seven fund sectors that had one loss-making fund each: Asia Pacific Excluding Japan, Flexible Investment, Global, Global Emerging Markets, Global Emerging Markets Bond, Mixed Investment 20-60% Shares, UK Equity Income.
Of the six remaining funds the Schroder ISF Global Energy fund was the worst performer. The global energy strategy managed by Mark Lacey recorded a loss of 4.68 per cent across the year.
Performance of fund vs sector in 2018 and 2019
Source: FE Analytics
In the emerging markets sector, Lazard Mena – a Middle East & North Africa equities strategy – was the worst performer in 2019, having made a loss of 4.45 per cent. It represents a dramatic reversal in fortunes for the five FE fundinfo Crown-rated strategy managed by Fadi Al Said, having emerged as the only fund in the sector to make a gain in 2018 when it was up by 7.63 per cent.