Which Funds Have Been Worst Hit By the Market Sell-off?

The FTSE 100 has lost £110 billion in just 10 days, alongside tumbling developed and emerging equity markets, fixed income prices and commodities. Which funds have been hit?

Karen Kwok 15 January, 2016 | 4:50PM
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2016 has not been a profitable year so far for investors. Equities, bonds and commodities have all slumped together since the start of the year. But how large is the damage? And which funds have felt the brunt of the bear?

It is not surprising to see oil and mining stocks are the biggest losers of 2016 so far. Many commodities lost up to half their value last year, and it has continued into 2016. Therefore open and close-end funds that have direct exposure to the mining stocks are also greatly affected. Stocks across the banking sector have also struggled in the past fortnight – and those funds which hold large positions in the financials sector have been hit.

Miners are Having Difficult Time

For investors looking to take the leap into miners right now, it does seem like uncertain times – although there is some argument that now is the opportunity for long-term investor to get in at a low price.

BlackRock World Mining Trust (BRWM) has been one of the biggest fund losers year to date, down 6%. This is because the fund has direct exposure to mining stocks within FTSE 100 that have been volatile in the past fortnight.  The investment trust has 9% of its portfolio in Glencore (GLEN), which as lost 13% year to date. It also has 13% of its portfolio in BHP Billiton (BLT), which has lost 14% year to date. And it has 12% in Rio Tinto (RIO), which has lost 13% year to date. The fund carries significant risks, as its portfolio has high exposure to movement in metal and gold prices. Although the sector has been unstable in recent years, the management team at the trust is highly experienced and investors have been well compensated over the long term, so Morningstar analyst Fatima Khizou remains a positive view to the fund, rating it Silver. The yield of the fund is at 13%.

Major oil companies like Royal Dutch Shell (RDSB) have not been saved from the market selloff. Shell has lost 10% from year to date, which has led to a drop of 5% in Merchants Trust (MRCH) value, a fund that has 7% of its portfolio in the company.

Bank Stocks Fall in New Year Sell Off

Financial stocks continue to be hammered in 2016; and it was asset management share prices that experienced the biggest losses within the banking sector.

Stockbroker Hargreaves Lansdown (HL.) has lost 14% year to date, which is second only to mining stocks as the biggest FTSE 100 losers. Finsbury Growth & Income (FGT) has the most exposure to the stock, having 8% its portfolio in Hargreaves. The fund also has 6% in Schroders (SDR), the asset management stocks that have fallen 13% from year to date. As a result, Finsbury Growth & Income fund has fallen 5% year to date. Despite recent losses, it is Rated Gold by Morningstar analysts who say that the fund manager’s process was thorough and well-proven over a number of market cycles, which resulted in a concentrate portfolio of companies.

Jupiter UK Growth Fund is also at risk if bank stocks continue to slide. The fund has 7% of its portfolio in Barclays (BARC), which has lost 10% year to date. The fund also has 7% in Lloyds Banking Group (LLOY), which lost 9% of its value year to date. The fund has lost 2% since the start of the year.

Morningstar analyst Daniel Vaughan said that Jupiter UK Growth was suitable as a core holding for investors seeking exposures to UK equities. The fund has been downgraded from Silver to Bronze by Morningstar analysts due to the recent change of fund manager. Although Vaughan has high regard for the fund manager’s stock-picking ability, at present there is no analytical support or backup on the fund. Therefore Vaughan is treading cautiously with the fund under the manager’s sole management and with fewer dedicated resources than previously.

Insurance Fail to Insure Against Losses

Insurance stocks have crumbled as well. The Old Mutual UK Equity Income Fund has 4% of its portfolio in Direct Line Insurance Group (DLG), and this Bronze Rated fund has lost 3% year to date. Direct Line has fallen 10% from year to date. SVM UK Opportunities, having 6% of its portfolio in the Prudential (PRU), has lost 5% year to date. Prudential shares have lost 10% of value year to date.

Drop in Pharmaceutical Giant Share Price

BlackRock UK Equity has lost 4% year to date, thanks to 6% of its portfolio in Shire (SHP), a specialty biopharmaceutical company, which is down 12% year to date. The fund is Rated Bronze by Morningstar analysts. BlackRock’s three year track record and its stock selection are a little disappointing, according to Morningstar analyst Daniel Vaughan. The management of the lead fund manager Nick Little has been alright but not outstanding, according to Vaughan. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Barclays PLC216.75 GBX0.86Rating
BlackRock UK A Acc686.70 GBP-0.06Rating
BlackRock World Mining Trust Ord627.00 GBX0.48Rating
BNY Mellon Emerging Inc GBP Acc1.54 GBP0.30Rating
Direct Line Insurance Group PLC197.10 GBX-3.10Rating
Finsbury Growth & Income Ord854.00 GBX-0.35Rating
Glencore PLC497.00 GBX0.81Rating
Hargreaves Lansdown PLC898.60 GBX-0.51
Jupiter UK Growth L Inc273.99 GBP-0.09Rating
Lloyds Banking Group PLC55.52 GBX0.91Rating
Merchants Trust Ord587.00 GBX-0.51Rating
Merian UK Equity Income L GBP Inc  
Prudential PLC819.20 GBX-0.99Rating
Rio Tinto PLC Registered Shares5,785.00 GBX2.41Rating
Schroders PLC370.00 GBX-1.18Rating
SVM UK Opportunities Retail604.51 GBP-0.46Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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