The prospects of a national lockdown has weighed heavy on European funds, but things looks brighter in China. Some six of the 10 top performing funds in October are China-focused, with the rest of the list dominated by emerging markets funds.
As China continues on its upward trajectory from the depths of Covid-19 pandemic, the country's exports were up 9.9% year on year in September and the economy grew 4.9% in the third quarter of the year.
Top Performing Funds in October
We have looked at the performance of funds rated by Morningstar analysts; data from Morningstar Direct shows that investors enjoyed returns of up to 7.7% last month. Ben Yearsley, director at Shore Financial Planning, points out that China was first in and first out of the crisis: “There was a definite split between old and new in October with China, Emerging Markets, and Asia the standout performers in a turbulent month. China has led the way many times in 2020 and will be one of the few economies to grow this year.”
| Fund | Morningstar Analyst Rating | Morningstar Category | Return (%) |
| Robeco Chinese Equities | Neutral | China Equity | 7.7 |
| JPM China | Bronze | China Equity | 6.3 |
| Schroder ISF China Opportunities | Gold | China Equity | 6.0 |
| Schroder ISF China | Bronze | China Equity - A Shares | 5.9 |
| Fidelity Indonesia | Neutral | Indonesia Equity | 5.4 |
| Schroder ISF Greater China | Silver | Greater China Equity | 5.4 |
| GQG Partners Em Mkts Eq | Bronze | Global Em Mkts Equity | 5.3 |
| Schroder ISF Emerging Asia | Bronze | Asia ex-Japan Equity | 5.3 |
| JPM Greater China | Bronze | Greater China Equity | 5.0 |
| AS Emerging Markets Equity | Neutral | Global Em Mkts Equity | 4.9 |
The best performing fund in October was the Neutral-Rated Robeco Chinese Equities, which returned 7.7% in the month. Year to date, the fund has returns a hefty 47.9% , boosted by its holdings in Chinese internet giants such as Tencent (00700) and Alibaba (BABA), which occupy a signficant size of its assets (9.8% and 8.9% respectively), showing the high conviction fund manager Liying Du has in these names.
In second position is Bronze-Rated JPM China, which produced a return of 6.3%. Manager Howard Wang took the helm on the fund in 2016 and is closely assisted by Rebecca Jiang. “We are comforted to see the synergy develop between the two and believe that each of them brings their respective sector expertise to the table,” says Morningstar analyst Chloe Qu. “We have been encouraged to see an increased level of resources at the portfolio managers’ disposal.”
The other funds that have made it to the top are all emerging markets focused. These are the Bronze-Rated GQG Partners Emerging Markets Equity, Bronze-Rated Aberdeen Emerging Markets Equity, Bronze-Rated Schroder ISF Emerging Asia and Fidelity Indonesia.
Worst Performing Funds in October
At the other end of the spectrum, the worst performers list is a mixed bag of European, gold and energy funds. This is, perhaps, not surprising since that UK’s second lockdown comes hot on the heels of France, Belgium, and Germany to mention a few. “Clearly the pandemic in the developed world isn’t going away just yet,” says Yearsley. “Are investors seeing Europe as an old school value trap?”
The weakest funds in October are two German funds, the Bronze-Rated DWS Invest German Equities and Fidelity Germany, down 11.9% and 11% during the month. Biggest holdings in these funds include popular names such as German pharma large-cap five-star rated Bayer (BAYN) and German package delivery two-star rated Deutsche Post (DPW).
The Lindsell Train UK Equity fund finds itself unusually in the list of worst performers. The main detractors to the fund's performance in the month are publishing company RELX and luxury fashion retailers Burberry Group, which are down 11.5% and 12.7% over the month. RELX shares tumbled after the firm said it expected big losses in the exhibitions arm of the business this year, while Burberry is vulnerable to the impact of travel bans as a result of national lockdowns.
The year to date has been a torrid one for energy funds so it's little surprise to see the Neutral-Rated BGF World Energy and Bronze-Rated BlackRock Gold and General among the weakest performers. BGF World Energy, in particular, is down 46.5% year to date, as with businesses in lockdown and families stuck at home, the Covid-19 pandemic has hit demand for oil and gas.
| Fund | Morningstar Analyst Rating | Morningstar Category | Return (%) |
| JOHCM Continental European | Silver | Europe ex-UK Equity | -7.6 |
| Robeco S'tnable Eur Stars Eq | Neutral | Eur Lg-Cap Blend Equity | -7.7 |
| Schroder European | Silver | Europe ex-UK Equity | -7.7 |
| BlackRock Gold and General | Bronze | Precious Metals | -7.8 |
| Janus Hend Horizon Euroland | Neutral | Eurozone Lg-Cap Equity | -7.8 |
| LF Lindsell Train UK Equity | Bronze | UK Flex-Cap Equity | -7.9 |
| BGF World Energy | Neutral | Sector Equity Energy | -8.3 |
| Fidelity Eur Dynamic Growth | Silver | Eur Lg-Cap Grwth Eq | -8.7 |
| Fidelity Germany | Bronze | Germany Equity | -11.0 |
| DWS Invest German Equities | Bronze | Germany Equity | -11.9 |
