Emerging Market Funds Shine in August

India and LatAm funds did well but UK funds struggled

Sunniva Kolostyak 6 September, 2022 | 10:05AM
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It’s time to look at the funds that soared and flopped in August. This time, India and Latin America funds topped the charts, and various funds with a UK focus lagged.

August is normally a quiet month for markets as investors enjoy the last bit of summer and liquidity is low. Still, economics remained a hot topic: inflation kept on reaching new heights, the Bank of England raised rates again and energy bills continue to cause problems for consumers.

The flipside is that energy investors enjoyed good returns, and that boosted commodity heavy Latin America funds. Brazilian energy producer Petrobras (PBR) is up around 80% this year, and Sociedad Quimica y Minera de Chile (SQM), a Chilean miner, is up over 100%.

Top Funds in August

As a result, it’s not surprising to see three Latam funds among the top performers. Abrdn Latin American Equity had the highest return of these, with 10.76%, but all three posted returns above 10%.

Another region that did well is India. The top overall performer in August was Gold-rated FFSA Indian Subcontinent with 10.97%, and the fund has had a good year overall too with a return of 13.90%. The India index has been steadily climbing over the past two months, a turning sentiment after a more volatile first half of the year.  

Two US large-cap growth funds also made it into the top 10: Morgan Stanley’s Advantage and Growth funds. Both are down between 35-40% overall this year so returns of around 10% is a welcome change. That said, these are the only US equity funds in the top-performing 100, except for one other iteration of Morgan Stanley’s Advantage fund.

Overall, 480 funds among our dataset of 789 Morningstar-rated funds had positive returns in August.

Bottom Funds in August

At the other end we find a plethora of UK funds, from bonds to small- and mid-caps. The worst performer was Vanguard UK Govt Bond Index, one of two gilt funds in the bottom 10, with a loss of 8.58%. Overall, the GBP government bond category is heavily featured in the bottom 50 performers as bond yields rose and prices fell. 

The Bloomberg global aggregate benchmark for global bond markets fell almost 4% in August and UK gilts were in the eye of the storm.

According to Ben Yearsley, director at Shore Financial Planning, August was the worst month for benchmark 10-year gilts for over 35 years. The yield rose from 1.84% at the end of July to finish the month at 2.8%, with reduced confidence over the economy stability seeing investors demand a higher return for holding UK debt. Markets are also pricing in further interest rate rises from the Bank of England.

David Zahn, head of European Fixed Income at Franklin Templeton, says that bond markets will focus closely on Liz Truss’s new policies: “The gilt market will probably see higher yields as investors wait for clarity from more detailed policies over the coming months. Investors will wait for her new policies and cabinet appointments and will penalise increased deficit spending without a plan of how to bring the UK government financial house in order when the demands on the government are very substantial.”

Elsewhere among the laggards we find three UK mid-caps and three UK small-caps. Jupiter’s UK Mid Cap and UK Smaller Companies were the second and third worst performers in August, also down about 8%. Whether market sentiment will change now the next prime minister has been announced is yet to be seen.


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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Sunniva Kolostyak

Sunniva Kolostyak  is data journalist for Morningstar.co.uk

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