Best and Worst Performing Funds in January

Tech and index-linked funds were among the best performers last month, while Chinese stocks where hit hard by the coronavirus outbreak

Annalisa Esposito 3 February, 2020 | 12:42PM
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The best performing funds in January are either US-focused, tech-focused or index-linked gilts, Morningstar data reveals.

Fund Name Morningstar Analyst Rating  Return (%)
Morgan Stanley US Advantage  Silver 7.6
PGIM Jennison US Growth Silver 7.1
BGF World Technology  Silver 6.9
Polar Capital Global Tech Income  Silver 6.7
T. Rowe Price Global Tech Equity Neutral 6.5
Franklin US Opportunities  Neutral 6.2
iShares Index Linked Gilt Index Neutral 5.9
L&G All Stocks Index Linked Gilt Index Neutral 5.0
Royal London Index Linked Bronze 5.0
Baillie Gifford Global Discovery Silver 4.7
   

At the top of the list are two US funds, Morgan Stanley US Advantage and the PGIM Jennison US Growth, which are up 7.6% and 7.1% respectively over the month.

The funds are both rated Silver by Morningstar analysts because they deliver higher profits than their peers’ - the Morgan Stanley US Advantage in particular has beaten its Morningstar category by 4 percentage points in January.  

The fund invests only in 38 holdings, many of which fall in the growth bucket. “The team's focus on steady growth companies has provided ballast, particularly in turbulent times,” says Morningstar analyst Jeffrey Schumacher.  

Amazon, Intuitive Surgical and Service Now are the top three holdings – occupying 6.8%, 5.3% and 5.2% of the assets, indicating the team's willingness to bet big on top picks. “Letting winners run can introduce risks, even for a strategy that has otherwise provided a relatively smooth ride, but investors remain well positioned here,” says Schumacher.

Next on the list are tech funds, with Blackrock Global World Technology, Polar Capital Global Tech and T. Rowe Price Global Technology Equity returning 6.9%, 6.7% and 6.5% to investors.

It was a good month for the tech-heavy Nasdaq, which rose 2.2%. This because Microsoft and Facebook reported positive results – Facebook in particular has beaten expectations, reporting earnings of $2.38 per share, compared with a $2.19 forecast. 

Four index-linked funds also made it in the top 10. These assets are a popular choice among investors at times of uncertainty, because the assets they invest in rise in line with inflation - this provides protection to investors who are concerned about the value of their capital being eroded.

The Neutral-rated iShares Index Linked Gilt leads the way, delivering a return of 5.9% in the month.

“Investors simply looking for a low-cost, expertly managed and tightly tracking index fund to gain exposure to the market of UK government inflation-protected bonds may find that iShares Index Linked Index meets their expectations,” says Morningstar Jose Garcia-Zarate. However, he points out that the fund is unlikely to offer returns above the UK inflation-linked bond Morningstar Category average over a full market cycle. “In fact, in some phases, it can lag significantly.”

Chinese Stocks Hit by Coronavarius  

The coronavirus epidemic has killed hundreds so far and also hit Chinese shares hard.

It's no surprise then the worst performing fund in the month is Silver-rated Fidelity China Focus, down 8.8%. The fund invests in 84 holdings, among which China Construction Bank and China Mobile occupying 7.2% and 6.3% of its assets.

Fund Name Morningstar Analyst Rating  Return (%)
Fidelity China Focus Silver -8.8
Nordea 1 - European Value  Bronze -8.5
Dimensional Emerging Mkts Val Bronze -7.9
Jupiter Absolute Return Neutral -7.7
BGF World Energy  Neutral -7.4
Schroder European Recovery  Neutral -6.9
First State China Growth  Gold -6.5
Schroder Income  Bronze -6.1
JPM Global Natural Resources Neutral -6.1
Schroder Recovery Silver -6.0

But the Fidelity fund is not the only China fund on the list. First State China Growth, which is Gold-rated by Morningstar analysts, is also in negative territory, suffering a loss of 6.5%.

The rest of the list is a mixed bag. In second and third position, the Nordea 1 European Value and Dimensional Emerging Markets Value, both Bronze-rated by Morningstar analysts, which are down 8.5% and 7.8% each.

Neutral-rated Jupiter Absolute Return is down 7.7%, showing how alternative assets are still out of favour in the new year as investors grow frustrated with disappointing returns. The asset class was out of favour for the entirety of 2019 too. 

Two recovery funds are also among the worst funds, the Neutral-rated Schroder European Recovery and the Silver-rated Schroder Recovery, down 6.9% and 6% each.

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

Annalisa Esposito  is a data journalist for Morningstar.co.uk