Best and Worst Performing Funds in January

China funds remained top of the pack, while Latin American and Japan funds struggled as global equities lost ground towards the end of the month

James Gard 1 February, 2021 | 12:44PM
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Gold trophy

Global equities had a strong end to 2020 but January was more of an uphill struggle as familiar worries such as the economic impact of coronavirus resurfaced. Away from the GameStop drama, world markets ended the month very much where they started, with a strong start to January cancelled out by weakness as the month drew to a close.

Still, when we look at the best performing Morningstar rated funds for January, we can see the 2020 winners have managed to maintain their strong form going into 2021, with China again leading the pack as we approach Chinese New Year on February 12. Eight out of 10 of the best-performing funds have a China focus, with Bronze-rated Invesco Greater China Equity the best of the bunch, gaining 8.7% in January. Its top holdings include internet retailer JD.com (JD) and social networking giant Tencent (00700), which are rated two and three stars by Morningstar analysts respectively. The next best performing China fund, Silver-rated JPM China, isn’t too far behind with a rise of 8%.

top performers january

While tech stocks in general have so far struggled to get off the ground this year, two tech-focused funds from Baillie Gifford have maintained their strong performance. Baillie Gifford Global Discovery, which has a Morningstar Analyst Rating of Silver, rose 8.2% in January, adding to 2020’s impressive 76.8% return. Baillie Gifford Worldwide Discovery is third on our monthly list, and the two funds both have Silver Ratings from Morningstar and both have Tesla (TSLA) and Ocado (OCDO) as the top to holdings.

BG Worldwide Discovery is the only fund in our January 2021 top 10 list that was also a top performer a year ago in January 2020 – that list was topped by Morgan Stanley US Advantage, which came fifth overall in 2020 with a gain of 71%.

Robeco Chinese Equities is the only fund in January’s top 10 to have a Morningstar Analyst Rating of Neutral – the rest are Gold, Silver and Bronze rated.

Gold, LatAm and Japan Struggle

At the other end of the performance scale, Bronze-rated BlackRock and General was the worst performing fund, with a loss of 6.5% as companies involved in mining the yellow metal lost ground after a stellar 2020.

Gold was one of the best performing asset classes in 2020, even beating US stock markets, as investors flocked to the safe haven during the crisis – and carried on buying even as the March crisis subsided. With equities back in favour and Bitcoin rallying as an alternative safe haven, can gold maintain its 2020 form?

There are early signs that Reddit traders are now looking at silver as the next GameStop, so that could make for an interesting month for precious metals funds. BlackRock Gold and General performance waxed and waned through 2020 and we saw it feature in both the best and worst performers list through the year. It ended the year up a respectable 27%.

Bottom 10 funds

Japan funds are scattered among the bottom performers list in January as these markets tracked global equity market weakness and GameStop-related volatility rippled out to Asia-Pacific markets; Silver-rated Lindsell Train Japanese Equity fund was the worst performer of these, with a loss of 5.9%, but this came after a 3.6% gain in 2020 as a whole.

Japan is a country that has had a low Covid-19 infection rate and has benefited from the China-driven growth in the region. Latin America has been less lucky in this regard, with Brazil one of the most affected countries in the world by the pandemic. So it’s no surprise to find three Latin American funds in the bottom 10, with BlackRock, Aberdeen Standard and JPMorgan products among the laggards. Latin American funds were among the worst performing in 2020 with double digit losses, and January looks like more of the same for LatAm investors.

It’s probably too early to deduce the path of the year from one month’s data, or glean how markets will perform based on the recent modest correction. “While the losses have been quick and dramatic, as they usually are, they have only dented the rally from November, not wiped it out entirely,” says IG’s chief market strategist Chris Beauchamp. There are still plenty of moving parts for stock markets to consider this year, including the effect of a $2 trillion stimulus in the US, the path of economic recovery from Covid-19 and the speed of the vaccine rollout. 

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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James Gard  is content editor for Morningstar.co.uk