Fund Investors Suffer Losses in 2018

Almost all fund categories failed to deliver positive returns in 2018, Morningstar analyst data reveals

Jonathan Miller 8 January, 2019 | 9:44AM
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stock markets across the globe fell in 2018

2018 was an annus horribilis for fund investors. In our analysis of data across Morningstar fund categories, we cast the net over last year's outcomes, assessing performance in a number of currencies. Currency proved an important influence over returns last year – particularly for euro- and sterling-based investors, whose currencies weakened against the US dollar.

Looking at the performance of the default indexes for 106 equity categories, sterling investors were best off, albeit from a very low base. Despite the well-documented emerging-markets woes throughout most of the year, Russian and Brazilian indexes provided positive returns for euro and sterling investors.

On the flip side, Turkey and China A-shares were at the very bottom of the pile. The former plummeted 41.4% in US-dollar terms and the latter 33%. Small caps in Europe suffered, too, while on a relative basis, the Scandinavian markets held out best. This still provided little comfort.

fund performance in 2018

Despite the lack of appetite for government bonds, yields fell in the last few months of 2018, providing some safe-haven status.

Of the 24 euro-denominated categories, the average EMEA index was positive in two: EUR bond–long term, returning 3%, and the EUR government bond index just 0.1%.

Of the 13 sterling-denominated categories, the average fund eked out positive returns in two sectors: GBP government bond, up 0.2%, and GBP diversified bond–short term a meagre 0.1%.

Of the 25 US-dollar-denominated categories, the average EMEA fund was positive in three: the USD diversified bond–short term sector returned 0.7%, global bond–USD hedged funds returned 0.4%, and USD government bond was barely in positive territory up 0.03%.

Areas suffering the worst were naturally those at the riskier end of the spectrum, such as high-yield and emerging-markets debt. Given that overall there was little room for shelter, it's hardly surprising that the average fund in each of the allocation categories posted negative returns. So-called flexible funds that can go anywhere fell in tandem with aggressive offerings, showing just how tough the art of asset allocation is.

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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About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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