This year has started with a bang for investors. After a tough 2018 amid slowing global growth, trade worries and Brexit uncertainty to name just a few headwinds, 2019 has been rather more fruitful.
A cursory glance through the average return for funds in each Investment Association (IA) sector shows positive across the board in the first quarter of 2019. That’s in stark contrast to last year, which saw only five finishing in the black.
Funds in four sectors – China/Greater China; Technology & Telecommunications; North American Smaller Companies; and North America – saw double-digit returns, while other equity-focused sectors did well, too. US stocks had their best three months since the second quarter of 2009.
Bonds had an excellent first quarter, with all sectors up over 1%. Indeed, high-yield bonds had their best three-month return since the final quarter of 2011, notes Rory McPherson, head of investment strategy at Psigma Investment Management
The worst-performing sector outside of money market funds was 2018’s best performer: UK Direct Property.
However, unlike with investment trusts, it was possible to pick a fund rated positively by Morningstar analysts and lose money through the first three months of 2019.
Below, we round up the five best and five worst-performing open-ended funds with Gold, Silver or Bronze Morningstar analyst ratings in the year to March 31, with all returns converted into pound sterling.
Best-Performing Funds
Despite a clearly slowing economy, Chinese stocks topped the charts, with the IA China/Greater China sector gaining 14.5% in the first quarter. The region was helped mainly by positive noises coming from trade talks between it and the US despite no agreement materialising yet.
The continued addition of Chinese A-shares into headline indices from a plethora of index providers gave a boost, too. With that in mind, it’s not surprising that the Bronze-rated Janus Henderson China Opportunities fund was the best-performing, returning 16.5%.
Managed by Charles Awdry and May Wee, the £1.27 billion offering is high conviction, with just 31 stocks, and has top three holdings in Tencent, Alibaba and AIA. It’s a “solid offering for investors looking for an actively managed China equity fund”, says analyst Simon Dorricott.
Closely matched in second and third spot are a pair of Bronze-rated US funds, MFS Meridian US Concentrated Growth and Franklin US Opportunities, with 16.15% and 16.13% respectively. Both funds have top-three positions in e-commerce giant Amazon giant and software firm Microsoft.
Rounding out the top five are the Silver-rated pair of Polar Capital Global Technology (15.7%) and T. Rowe Price Global Growth Equity (15.4%). The pair both benefited from the surge in technology valuations, with Amazon, Alphabet and Alibaba all top positions.
Worst-Performing Funds
Bottom of the pile in the first quarter was the Bronze-rated Jupiter Absolute Return fund, run by James Clunie. The offering, which shorts stocks as well as investing in them, had a difficult three months and lost 4.6% in value.
Short positions on the likes of electric car maker Tesla, online retailer Wayfair and streaming service Netflix conspired to weigh on the fund, which seeks to generate absolute return independent of market conditions over a three-year rolling period. As of March 29, it was down 0.67% over that three-year period.
A trio of Bronze-rated funds investing in fixed income securities came in second, third and fifth worst, with AXA Euro Credit Short Duration, Carmignac Sécurité and M&G European Corporate Bond losing 3.4%, 3.25% and 1.8% respectively.
Finally, Sashi Reddy and David Gait’s Silver-rated Stewart Investors Indian Subcontinent Sustainability fund also lost 1.8% and came in as the fourth worst-performer.
With elections on the horizon, India’s stock market has faced headwinds such as a strong oil price over the past year or so and the fund, which has a quarter of its portfolio invested into technology has suffered.
Still, it boasts a strong and experienced team backed by a solid research team that follows a well-articulated and consistent process, says Morningstar analyst Jan Nel. The fund invests in companies with management teams that act with integrity, are long-term oriented and demonstrate an ability to effectively allocate capital.
