How did Funds Perform in July?

There were few places for investors to hide in July, with Convertibles the only asset class to produce positive returns in the month 

Annalisa Esposito 5 August, 2020 | 10:59AM
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Fund performance

Any investor who thought the worst of the Covid-19 crisis was over, was dealt a blow in July, as all asset classes took a hit. While stock markets had rallied in recent months from the post-sell-off lows, our monthly analysis shows a sea of red this time round.  

It's a sharp turnaround from June, when all asset classes produced positive returns. In our monthly heatmap, negative returns are depicted by shades of red - the darker the red, the bigger the losses. Just one square in this month's map is green; converitbles produced a 0.5% return in July. 

The chart below shows the returns of each asset class in July. The size of the box denotes the level of assets under management in the category.

heatmap

Convertibles are securities, usually bonds, that can be converted into common stock. These often appeal to investors as a halfway house between bonds and equities - typically paying a higher income than shares but a lower coupon than a bond. The option to convert the bond into common stock can add additional value for the investor.  

Commodities funds came in flat, with an average return of 0% in July. But this overall picture hides the vast difference in performance between the different types of commodity in the month. Precious metal funds, for example, produced an average return of 6.3% in July as investors sought safety in gold, sending the yellow metal to a record high. Soft commodities such as grains along with energy funds, meanwhile, were in the red - down an average of 4.6% and 2.7% respectively.  

If there is one clear loser for the month, however, it is Money Market funds, which tumbled by an average of 2.5% over the period. These were followed by Fixed Income and Property funds, both of which were down around 2.1%. 

Equity funds fell, on average, by 0.2% as fears of a second wave of the coronavirus kept some investors cautious. However, some markets did better than others. For example, the Morningstar China Equity Category rose by 6.6%, while Vietnamese equities were down 8%.

Funds Fall Back in July

The volte-face in funds’ average performance between June and July is clear to see. Global stock markets have been incredibly volatile, and fund performance has similarly fluctuated through the year to date, with investors struggling to find shelter even in perceived safer options such as money markets and fixed income funds.

While in June all the assets classes were at the right side of the black line, indicating a positive return, in July all but one (convertibles) were on the left side.

However, according to Morningstar Direct data, the best performing fund in July was up 12%, highlighting further the disparity between the winners and losers in a continually unpredictable year.

funds

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