Funds investing in technology and US equities were among those posting the highest returns during the first half of 2018, FE Analytics data shows, while emerging markets have gone on to have a poor start to the year.
2017 was characterised by strong and synchronised global growth, with almost all equity markets making good returns over the period.
However, this year has seen a shift away from such synchronised global growth with the US outpacing other markets.
As such, the funds seeing the highest returns over the six first months of 2018 were those investing in FAANG stocks – Facebook, Apple, Amazon, Netflix and Google parent Alphabet – which have driven US market performance more recently.
Source: FE Analytics
The best performing sector of the first half was the IA Technology and Telecommunications sector with a 10.05 per cent total return.
It was followed by the IA North American Smaller Companies, which was up by 9.32 per cent for the first six months of 2018. Third-placed was the IA UK Smaller Companies sector with a 5.26 per cent average return, swiftly followed by the IA North America sector with a 5.24 per cent return.
At other end of the performance table was the IA Global Emerging Markets and the IA Global Emerging Markets Bond sectors, where the average fund made respective losses of 6.28 per cent and 4.64 per cent.
“Global markets have definitely been spooked in recent times. president Donald Trump’s trade comments, which might lead to a full-blown trade war with China and the EU are causing concern as is the prospect of continued rising US interest rates,” noted Ben Yearsley, director at Shore Financial Planning.
“The US 10-year rate is currently 2.85 per cent but has been as high as 3.11 per cent during the first half of 2018. Unsurprisingly emerging markets have borne the brunt of the dollar squeeze.”
The top 10 strongest performers featured three Baillie Gifford funds: Baillie Gifford American, Baillie Gifford Long Term Global Growth Investment and Baillie Gifford Global Discovery.
“Baillie Gifford long term growth positioning with many big tech names has worked impressively in their favour this year as many of these stocks have continued to dominate,” said Yearsley. “It is therefore no surprise seeing pure technology funds in the top ten in the first half of 2018 alongside the Baillie Gifford funds.”
Indeed, the best performer of the first half was the £1.6bn Baillie Gifford American, overseen by Gary Robinson alongside Helen Xiong, Tom Slater and Kirsty Gibson.
Over the six months to end-June, the fund delivered a 29.77 per cent total return compared with a 5.24 per cent gain for the average fund in the IA North America sector and a gain of 4.88 per cent for the S&P 500 index.
Mark Hawtin’s GAM Star Technology from the Technology & Telecommunications sector came second, up by 22.8 per cent so far this year.
Another fund with FAANG stocks among its top ten holdings rounds out the top three funds for the first half, the four FE Crown-rated Morgan Stanley’s US Growth, overseen by Dennis Lynch.
During the first six months of 2018, the $2.86bn fund delivered a 21.82 per cent total return compared with a 5.24 per cent gain for the average fund in the IA North America sector.
Source: FE Analytics
A fund from the IA Specialist sector – home to a wide range of strategies – was the fourth best performer of 2018’s first half with a gain of 20.84 per cent, the £100.6m Smith & Williamson Artificial Intelligence strategy overseen by Chris Ford and Tim Day.
Two Baillie Gifford funds come next on the list of top performers, Mark Urquhart’s Baillie Gifford Long Term Global Growth Investment and Douglas Brodie’s Baillie Gifford Global Discovery, both from the IA Global Sector.
Other funds making it onto the top 10 include Aubrey Global Conviction, Neptune Global Technology and AXA Framlington Global Technology, all with an overweight to US equities.
JPM Emerging Middle East Equity, which invests in companies of the emerging markets of the Middle East also made it onto the list of 2018’s first half top performers.
At the other end of the performance table there was a discernible trend, with many of the worst performers funds investing in emerging markets, and particularly Latin American and Indian strategies.
Indeed, the worst performer of the first half was the offshore JPM Brazil Equity, overseen by Luis Carrillo and Sophie Bosch de Hood. The fund made a 19.91 per cent loss compared with a 15.80 per cent loss for the MSCI Brazil 10/40 index benchmark.
Another JP Morgan fund also overseen by Carrillo and Bosch de Hood – the $676.9 JPM Latin America Equity – is also among those with a poor start to the year recording a loss of 15.36 per cent.
Other emerging markets funds at the bottom of the table include MFS Meridian Latin American Equity, JGF-Jupiter India Select and Jupiter India.
Both Jupiter asset management’s funds are overseen by Avinash Vazirani. The larger £1bn Jupiter India fund was down by 16.42 per cent.
Source: FE Analytics
Despite the dominance of emerging markets funds at the bottom of the performance table, there were also a number of funds from other sectors.
From the IA Targeted Absolute Return sector was FE Alpha Manager David Crawford’s City Financial Absolute Equity which fell by 16.5 per cent during the first half.
Meanwhile, IA Specialist fund TC South River Gold and Precious Metals also performed badly with a loss of 13.56 per cent.
Elsewhere, the worst performing UK equities fund was the £76m Quilter Investors UK Equity Income strategy, which is located in the IA UK All Companies sector. The fund was down by 13.13 per cent compared with a 2.63 per cent gain for the average peer group fund and a rise of 1.69 per cent for the FTSE All Share index.