Fund performance hit as inflation bites and growth slows   

A recent study from financial data firm FE Analytics, shows that fund investors endured a torrid start to the year with 90% of funds losing money; one in three strategies have delivered double-digit losses – writes Christian Leeming

 
Since the Global Financial Crisis in 2008, buoyed by falling interest rates and quantitative easing by the central banks, stocks have climbed steadily higher; however, this research, highlights how difficult investment conditions are, as UK inflation hits 30-year highs and the Bank of England begins to raise interest rates.   

With inflation widely predicted to top 10%, central banks are now hiking interest rates to cool down economies and stocks have gone into reverse as investors are lured by the prospect of higher returns from safe government bonds. The Russian invasion of Ukraine has also brought turmoil to markets around the world. 

Data from FE Analytics shows that of the 5,000 funds included in the Investment Association universe, just 10.9% have turned a profit in 2022.   

The top-performing sectors are commodities and Latin America, which have been buoyed by rising raw material prices; however, there are some sectors where not a single fund is in profit, including China/Greater China, European Smaller Companies, Sterling Corporate Bond and UK Index Linked Gilts. 

Technology has been the second-worst place to be invested, with 97% of funds posting double-digit losses. T. Rowe Price Global Technology Equity is the worst performer, plunging 43.5%; Herald Worldwide Technology is the best performing of the technology sector’s loss-making funds, losing ‘just’ 11.7%. 

The spilt between negative and positive funds is similar for stock and bond funds, but 95% of mixed asset funds have lost money this year.  

In positive territory, nearly 60% of Latin America funds generated double-digit profits. Schroder ISF Latin American (+16.8%), Barings Latin America (+15%) and BlackRock Latin American (+14.2%) were the best performers. 

Commodity/Natural Resources, were close behind with 57.7% of funds in double-digits, with the best performers benefitting from the surge in energy prices. iShares S&P 500 Energy Sect ETF (+52%), Xtrackers MSCI USA Energy ETF (+42%) and BlackRock BGF World Energy (+49%) were the standouts. 

Elsewhere, 21% of Infrastructure funds have made more than 10% this year, as have 11% of Specialist funds. 

UK funds have performed comparatively well; the average UK Equity Income fund is down 3.5% and UK All Companies funds down 10%.  

UK Smaller Companies failed to compete, losing 19% on average. 
 
Worst performing fund sectors this year 

FE Analytics, 11 May 2022