Japanese equity funds crowded the top of the performance table in September but a UK strategy emerged as the best performer of the Investment Association universe, according to data from FE Analytics.
In terms of sectors, the two Japanese equity peer groups topped the table as a trade deal between US and Japan was announced earlier in the month.
The IA Japanese Smaller Companies sector was up by 3.62 per cent and the IA Japan sector was up by 3.53 per cent.
There was good news for investors in domestic markets as UK equity peer groups dominated the top of the performance table thanks to a rebound in sterling.
The pound strengthened as a ‘hard Brexit’ was once again put in doubt following a ruling by the Supreme Court that prime minister Boris Johnson had wrongfully prorogued Parliament.
Johnson had sought a five-week closure of Parliament that would give little time for the tabling of any motions to prevent a ‘no deal’ Brexit.
As such the main UK equity sectors – IA UK Equity Income, IA UK All Companies and IA UK Smaller Companies – all recorded top returns.
Source: FE Analytics
Ben Yearsley, director at Shore Financial Planning, said: “Equity income is a stalwart of many investors’ portfolios so it is good to see that sector perform well.
“Many equity income managers will be overweight domestically orientated stocks, which will benefit from a Brexit deal and a sterling bounce.
“The ‘no deal’ legislation in parliament last month, whilst tying Boris’s hands, helped investors in the UK. Though don’t forget, a sterling bounce is bad for the value of any overseas investments.”
He added: “Frankly I’m bored with the Westminster games; unfortunately what the esteemed elected members forget is their idiocy has a big impact on the economy and investors.
“Will October finally see the light at the end of the Brexit tunnel?”
At the other end of the table, the IA Asia Pacific Excluding Japan sector was the worst performer with the average fund down by 1.71 per cent.
It came as US and Chinese tariffs on each other came into effect at the start of the month and data showing the impact of the trade war on the US economy started to be published, with the growth style – synonymous with the US markets – underperforming value.
Furthermore, the Federal Reserve’s 25 basis points rate cut underwhelmed many, particularly after the European Central Bank announced more robust measures to support the eurozone economies.
As such, the average IA North American Smaller Companies peer recorded a fall of 0.91 per cent while the IA North America sector was down 0.58 per cent. The IA China/Greater China sector made an average loss of 0.86 per cent.
The best-performing individual fund of last month was JOHCM UK Equity Income, the £2.8bn fund managed by James Lowen and Clive Beagles. Almost two-thirds (62.3 per cent) of the equity income portfolio is invested in FTSE 100 earners, while the remainder is invested in small- and mid-cap stocks.
Source: FE Analytics
Other top-performing UK equity strategies included the SVM UK Opportunities (up 7.24 per cent), VT Cape Wrath Focus (6.82 per cent) and GVQ UK Focus (6.43 per cent).
As noted above, Japanese equity strategies also performed strongly last month with the best among them being the Neptune Japan Opportunities fund (up 7.68 per cent). The £108m fund is overseen by Chris Taylor and takes a long-term approach to investment using a combination of economic, industry and stock-specific analysis to select stocks.
Other top performing strategies included Nomura Japan Strategic Value (up 7.40 per cent), Barclays GlobalAccess Japan (6.90 per cent) and GS Japan Equity Partners Portfolio (6.41 per cent).
There were a number of top-performing Indian equity strategies as prime minister Narendra Modi unveiled a package of tax cuts.
The best performer was the Alquity Indian Subcontinent fund, which was up 6.77 per cent, while the Invesco India Equity fund made a 6.44 per cent return.
At the other end of the performance table there were several different themes at work.
However, September’s worst performer was VT Garraway UK Absolute Equity fund, the long/short equity fund overseen by David Crawford and Ade Roberts.
It was down by 49.29 per cent, although it should be noted that the fund is suspended after receiving a high number of redemption requests and is currently in wind down.
Source: FE Analytics
The next worst performer was the £613.8m Polar Capital UK Absolute Equity fund, another long/short equity strategy and overseen by FE Alpha Manager Guy Rushton, which made a loss of 12.09 per cent.
There were also a number of growth-oriented US equity funds found at the foot of the table. The worst performer of this group was the New Capital US Future Leaders fund, which was down by 9.64 per cent.
Other loss-making funds in September included Lord Abbett U.S. Growth Leaders (down 9.55 per cent), Morg Stnly US Growth (with a loss of 9.52 per cent) and Baillie Gifford American (which lost 9.42 per cent).
Another significant trend at the foot of the table was the number of gold and precious metals strategies. Having performed strongly since the start of the year, the yellow metal saw somewhat of a correction, with the Bloomberg Gold Sub index down by 4.66 per cent in sterling terms during September.
The worst performer from this sub-sector was the MFM Junior Gold fund – managed by Angelos Damaskos – which was down by 8.71 per cent. It was joined by HC Charteris Gold & Precious Metals (down 8.62 per cent), Investec Global Gold (losing 8.03 per cent) and Smith & Williamson Global Gold & Resources (down 7.25 per cent) among others.