Best and Worst Performing Funds in October

Gold makes a comeback while Japan and LatAm funds are in the doldrums

Sunniva Kolostyak 2 November, 2021 | 3:29PM
Facebook Twitter LinkedIn

Up and Down Arrows

Gold funds have had a stellar month after being near the bottom of the table for months, according to Morningstar Data.

Volatility across the markets have flipped the top and bottom funds table this October. Japan funds, which have had two months at the top of the table, are now at the bottom together with Latin American equity funds.

LatAm has been a consistent fixture at the bottom of the table for three months now. According to Ben Yearsley, investment director at Shore Financial Planning, Brazil is doing especially badly, and has not been helped by President Bolsonaro's “political shenanigans” amid the ongoing Covid-19 pandemic.

Several Asia funds also feature at the bottom of the table this month. China is still grappling with the Evergrande property crisis as well as rising inflation and slowing economic growth. Sharply rising commodity prices are being blamed as well as rising energy costs.

Japan is in the middle of another political transition with Fumio Kishida taking over from Yoshihide Suga, who was Japan Prime Minister for just over a year.

Yearsley says: “In Japan the ruling Liberal Democrat party won the general election, albeit with a reduced majority. PM Fumio Kishida will find it harder to push through his economic package.”

Top Performing Funds in October

Gold funds BlackRock Gold and General and BGF World Gold have both made the bottom 10 two months in a row but have jumped to take the top and third spot in October. Overall, the funds have lost just over 10% this year, but the recovery in the gold sector has allowed the BlackRock funds to return 11.48% and 9.04% respectively. Gold tends to do well at times of rising inflation.

US large-cap and technology funds also did well over the past 30 days after a strong reporting season for some of the US mega-caps like Microsoft. Equities in general have done well across the UK, Europe and US – the strongest performer being Lord Abbett Innovation Growth, one of last year’s big winners (returning 67.30%). This month it grew by 9.10%.

The energy sector is another area that is receiving a lot of attention at the moment. The COP26 conference in Glasgow is putting pressure on nations to fast-track the transition to renewable energy, but at the same time, record oil and gas prices are ensuring a fifth place for BGF World Energy with a 7.35% return. However, the fund has grown 45.69% so far this year.

Finally, the final word on inflation has not been said just yet: two inflation-linked gilt funds complete the top 10 performance list as the UK’s inflation numbers rebounded to the highest level seen since May.

“We have gone past edging towards a rate hike, and it now seems inevitable,” Yearsley says, citing a growing economy despite Brexit, energy prices and Covid-19. “Could a rate rise happen this week? Or will MPC decide to cut back on QE first? It still seems a big jump from printing money to upping rates with no intermediate step, however it also feels as if that’s what’s needed.”

Worst Performing Funds in October

While gold funds managed to escape from the bottom of the performance chart, most of the funds that have struggled this month are continuing a bad run. As mentioned, politics in Brazil have not done the market any favours, and neither has election-related concerns in Argentina.

ASI Latin American Equity is spending its third month in the bottom 10 while Latam funds from JPMorgan, Blackrock and Aberdeen feature there for the second month in a row. Moreover, the funds in the category are all down between 14-18% this year.

The rest of the list is populated by Asian high yield bond funds and Japanese large-caps. UBS (Lux) BS Asian High Yield is down 10.37%, the only fund to drop below the -10% mark. 

Asia’s bond market is worth roughly $20 trillion, and while the market is currently under pressure, Eastspring’s Asian fixed income team is more positive on the outloook. Following a patchy recovery for most of 2021, they believe higher vaccination rates should lead to a gradual re-opening of the region’s economies and lift growth. 

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.

Facebook Twitter LinkedIn

About Author

Sunniva Kolostyak  is data journalist for Morningstar.co.uk