Best and Worst Funds of 2020 So Far

It's been a volatile year so far and some funds have fared better than others. We look at the top and bottom performing open-ended funds of 2020 so far 

Annalisa Esposito 6 July, 2020 | 9:18AM
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It's been a tumultuous year so far, and investors have endured the worst sell-off that stock markets have seen for decades. But some funds have managed to buck the trend. Our round-up of the best and worst performing funds in the first half of 2020 shows that some investors have enjoyed hefty returns of up to 40%. 

Analysis of UK-domiciled funds that are rated by Morningstar analysts shows the top 10 performers of the year so are dominated by three themes: technology, growth and precious metals.

Top Performing Funds of 2020

The Neutral-Rated Morgan Stanley US Advantage fund leads the way due with its portfolio weighted towards technology and healthcare. The fund delivered an impressive return of 40% in the year to July 3.

The top contributors to its performance are Canadian e-commerce firm Shopify (SHOP), music streaming service Spotify (SPOT), online giant Amazon (AMZN) and cloud-computing leader Veeva System (VEEV).

Shopify's shares have soared more than 137% year to date as consumers have been forced to shop online while lockdown measures have been in place. But the strong performance means the shares now look toppy, and Morningstar has a one-star rating on the stock, indicating it is trading above its fair value.  

Also in the US Large-Cap Growth Equity category is the Neutral-Rated Lord Abbett US Growth Leaders. Up 34.8%, the fund has returned some 19 percentage points more than the average fund in its peer group.

Highlighting just how much the tech sector has dominated stock markets in recent months, three of our top 10 performers are tech-focused funds: Silver-rated BGF World Technology is up 39.5% year to date, Neutral-Rated Franklin Technology 33.2% and T. Rowe Global Technology Equity 30.5%.

“Technology companies have been huge beneficiaries of the lockdown as companies and people turn to digital services to carry on working and living their lives," says Adrian Lowcock, head of personal investing at Willis Owen. The themes of home-working and home-schooling have been front and centre since the outbreak of Covid-19, and the likes of Zoom, Microsoft Teams and Neflix are just some examples of services which have seen exponential growth in user numbers. 

Away from the tech world, gold funds have shone as investors looked for safety during the worst of the crisis. The Bronze-Rated Blackrock Gold and General and Blackrock World Gold are both up some 33%. The yellow metal is considered a safe-haven asset at times of uncertainty and its price has reached levels not seen for years. 

Fund Morningstar Rating Morningstar Category Return (%)
MS US Advantage Neutral US Large-Cap Growth Eq 40.5
BGF World Technology Silver Equity Technology 39.4
Baillie Gifford Global Discovery Bronze Global Small-Cap Equity 35.3
Lord Abbett US Growth Leaders Neutral US Large-Cap Growth Eq 34.8
BlackRock Gold and General Bronze Equity Precious Metals 33.3
Franklin Technology Neutral Equity Technology 33.2
BGF World Gold Bronze Equity Precious Metals 33.2
Baillie Gifford WW Discovery Bronze Global Small-Cap Equity 33.1
T. Rowe Price Global Tech Neutral Equity Technology 32.7
Polar Capital Global Tech  Silver Equity Technology 30.6

Worst Performing Funds of 2020

Despite putting in a stonking performance in May, when it delivered an incredible 23.1% return in a single month, H2O Allegro is the weakest fund of the year to date. The burst of strong performance has not been enough to reverse the heavy losses investors in the fund have endured in recent months and the fund is down 42.3% year to date.

The fund was downgraded by Morningstar analysts a year ago after being put under review amid concerns about its exposure to illiquid, high-risk bonds linked to controversial German entrepreneur Lars Windhors.

Elsewhere, Latin American funds are a main feature of the worst performing top 10 funds. Many emerging markets have strugged to cope as the coronavirus has hit the region, where many health services are already overstretched. The Neutral-rated BGF Latin American fund is down 32% year to date and Bronze-Rated, ASI Latin America Equity 29.82%.

A smattering of UK funds also find themselves among the worst performers cohort; a wave of dividend cuts from formerly reliable income paying stocks has hurt many investors in the region while value stocks continue to struggle. "Is it the UK's obsession with dividends that has caused the recent market lag, or is Brexit still at play," asks Ben Yearsley, director at Shore Financial Planning. 

The weakest UK fund in our list is Aberforth UK Small Companies, down 34.7% year to date. The main detractors from the fund's performance were holdings in Restaurant Group and FirstGroup, whose shares are down an eye-watering 65.4% and 59.8% respectively this year. The two companies have been victims of UK lockdown measures. Restaurant Group is behind popular chains such as Frankie & Benny's which was forced to close their doors back in March. The company entered into a CVA last month and is set to close 125 of its sites. 

Fund Morningstar Rating Morningstar Category Return (%)
H2O Allegro  Negative Alt - Global Macro -42.47
Allianz Structured Return Negative Alt - Volatility -35.76
Aberforth UK Small Companies Neutral UK Small-Cap Equity -34.78
BGF Latin American  Neutral Latin America Equity -32.12
AS SICAV I Latin American Eq  Neutral Latin America Equity -30.62
Artemis UK Smaller Companies  Silver UK Small-Cap Equity -30.37
Ninety One UK Special Situations Neutral UK Flex-Cap Equity -30.36
BGF World Energy  Neutral Sector Equity Energy -29.85
ASI Latin American Equity  Bronze Latin America Equity -29.82
JOHCM UK Dynamic  Silver UK Flex-Cap Equity -29.39

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