Just eight of the Investment Association’s sectors ended up in positive territory last month, with the IA Japan, the IA Global Emerging Markets Bond and the IA Japanese Smaller Companies the only sectors where the average fund delivered gain of more than 1 per cent, according to data from FE Analytics.
Last month the Federal Reserve confirmed markets’ expectation of another rate hike, which boosted the already soaring dollar.
In Europe, the euro fell on Friday to its lowest in two weeks while Italian bond yields jumped after Italian ministers agreed to set a higher-than-expected budget.
The burgeoning ‘trade war’ rumbled on in the background as the US president Donald Trump’s administration imposed new tariffs on $200bn worth of Chinese goods in September.
Performance of indices in September
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Source: FE Analytics
Generally regarded as a poor month for markets, September saw many of the main indices post negative numbers, as shown above.
The FTSE All Share was the best performer of the month with a gain of 0.70 per cent and ahead of the MSCI World, which ended the month up by just 0.23 per cent.
After a poor August, the MSCI Emerging Markets index continued to rack up losses after falling by 0.86 per cent in September, as the trade conflict and a strong dollar continues to hit most emerging economies.
In the fixed income sector, the benchmark Bloomberg Barclays Global Aggregate index, also fell by 1.19 per cent over the month, in sterling terms.
On a sector basis, the IA European Smaller Companies was the worst performer, down 2.66 per cent.
While August was characterised by strong gains by funds focusing in IA North American Smaller Companies and those in the IA Technology & Telecommunications sector, September saw both sectors fall to the bottom of the performance table with respective losses of 1.77 and 1.63 per cent.
The IA Property Other and the IA Asia Pacific excluding Japan were also found at the foot of the performance table losing 1.87 and 1.67 per cent respectively.
Only eight Investment Association’s sectors were in positive territory last month, with the IA Japan, the IA Global Emerging Markets Bond and the IA Japanese Smaller Companies the only sectors delivering a gain of more than 1 per cent.
Japanese exporters were boosted by a slide in the yen, while optimistic earnings outlooks also boosted the markets.
As a result, the average Japan fund was up by 1.47 per cent in September. The best-performing fund from the sector was Kentaro Takayanagi’s Nomura Japan Strategic Value, which delivered a 4.84 per cent total return.
The second-best performer for the sector was the £202m Barclays GlobalAccess Japan fund – which blends growth-focused asset manager Baillie Gifford with Schroders’ highly-respected value team to outperform in different markets – the fund was up 4.66 per cent.
The next best performing peer group was the IA Emerging Markets Bond sector, which rose by 1.02 per cent. The IA Japanese Smaller Companies was the third best performer with a gain of 1.02 per cent.
Performance of sectors in September
Source: FE Analytics
On an individual fund basis, an absolute return strategy sat at the top of the performance table in September.
The $3.3m GAM Star Discretionary produced a 14.02 per cent total return last month. The strategy is overseen by Adrian Owens and aims to achieve absolute returns over the medium term by investing in currencies.
Russian equity funds were also present at the top of the table with Pictet Russia index the second-best performer of the month delivering a 7.72 per cent gain.
It was joined at the top by Pictet Russian Equities up by 7.64 per cent and HSBC GIF Russia Equity, with a gain of 7.08 per cent. Robin Geffen’s Neptune Russia & Greater Russia fund was also found topping the table, up by 6.78 per cent in September.
The Russian market was boosted by rising oil prices, with the Bloomberg Brent Crude Sub index rising by 6.90 per cent in sterling terms.
A strategy with a value approach was also among the best performers in September, the £335.2m GAM Multistock Euroland Value Equity. Overseen by Hans Ulrich Jost, the fund targets long-term growth and rose by 6.40 per cent in September compared with a 0.57 per cent loss for the average IA Europe Including UK sector peer.
There were also a number of Latin American funds at the top of the table, with JPM Brazil Equity emerging as the best performer with a return of 6.31 per cent.
The worst performers of September were dominated by Indian equity funds. Currency concerns in India saw equity funds focused on the Asian economic giant particularly badly-hit in September. It continues to be under pressure due to the impact of global trade tensions, rising global crude prices and a growing current account deficit.
Performance of index YTD
Source: FE Analytics
As such, all 10 worst performing funds in September were Indian equity strategies.
The worst of the bunch was the four FE Crown-rated Invesco India Equity, which fell by 15.02 per cent.
However, there were also double-digit losses recorded by Jupiter India, GAM Star India Equity, JGF Jupiter India Select, Matthews Asia India, Neptune India, Franklin India, JPM India, GS India Equity Portfolio, HSBC GIF Indian Equity, and Aberdeen Global Indian Equity.
As the above chart shows, the MSCI India index, which covers approximately 85 per cent of the Indian equity universe, is down by 6.22 per cent year-to-date.