Investors holding the best performing funds in some sectors have made total returns that are over 50 percentage points higher than those owning the peer group’s worst performers during 2020 so far, Trustnet research shows. 
The spread of coronavirus across the globe and the economy-stalling lockdowns that have imposed to control the pandemic prompted brutal falls in financial markets during March. This means that the average fund in most Investment Association sectors is sitting on a loss over the year to date.
Of course, the performance of the individual funds in those sectors can vary greatly and that is what Trustnet will put under the spotlight in this article.
The table below shows the best and worst funds from each Investment Association sector over 2020 to the end of April, ranked in order of the difference between the two funds.
Source: FE Analytics. Performance between 1 Jan and 30 Apr 2020
It’s the IA Specialist sector where the difference has been the greatest, although this should not come as much of a surprise given the fact that many of its members are focused on very different assets to each other.
The LF Ruffer Gold fund has benefitted from the increased safe haven demand for the yellow metal that has been sparked by the coronavirus crisis, fears of a massive recession and the vast stimulus that has been unleashed to combat it.
This has led to a 29.33 per cent total return for the fund; BlackRock Gold & General, Quilter Investors Precious Metals Equity, Ninety One Global Gold, Smith & Williamson Global Gold & Resources and ES Gold and Precious Metals have also posted some of the peer group’s highest returns in 2020, but even they are so way behind LF Ruffer Gold.
In contrast, HSBC GIF Brazil Equity lost 47.27 per cent during 2020’s first four months – giving a gap of 76.60 percentage points between the IA Specialist sector’s best and worst performers.
Whereas gold funds dominate the top of the peer group, Latin American and Brazilian equity strategies sit in its 10 bottom spots. Investors have been concerned by Brazil’s slow response to the coronavirus pandemic while the country has also been affected by the crash in the oil price.
Performance of funds over 2020
Source: FE Analytics
Plunging oil prices are one of the reasons behind the wide gap in the IA Global sector’s best and worst performers, which stood at 63 percentage points over the period under consideration.
Schroder ISF Global Energy is down 43.47 per cent over 2020 so far, even though it was the best performer in the Investment Association universe in April’s market rally.
Making a 19.53 per cent return and sitting at the top of the IA Global sector is Baillie Gifford Long Term Global Growth Investment. Unlike the more cyclical holdings of an energy strategy, this fund concentrates on quality-growth companies – which have had a strong run over the past decade and continued to outperform in the coronavirus crash.
It’s a similar story with the sector in third place: IA North America. Baillie Gifford American is very much a growth fund with plenty of exposure to US tech (which has performed strongly during 2020’s challenging conditions) whereas Vanguard US Fundamental Value has suffered as investors continued to shun value stocks.
Of course, looking at the performance of just the best and worst performers in a sector is of limited use as these outliers often don’t give a true reflection of what is happening across a peer group.
The following table breaks each sector down into quartiles, showing the average return of a fund ranked in each of the four. Again, the table is ordered by the gaps in average performance for the top and bottom quartiles (which can be found in the final column).
Source: FE Analytics. Performance between 1 Jan and 30 Apr 2020
Some sectors are absent from this table, as quartile rankings of their members are not appropriate – so you won’t see the likes of IA Specialist, IA Targeted Absolute Return and IA Volatility Managed appearing.
It’s worth noting how owning a fund in the top quartile of some sectors has allowed investors to make a positive return in 2020 despite the plunge in risk assets and their average peer, while being in the bottom quartile has led to much heavier losses than the market.
Take the IA North America sector as an example. The average fund here lost 4.46 per cent in the first four months of 2020 but its average top-quartile member (which are largely quality-growth strategies) made a 4.85 per cent gain; the bottom-quartile lost 13.71 per cent on average, mainly because of a bias to the value style.