Technology and Latin America were among the sectors investors would have done well to avoid in April, as very few areas of the market made positive returns.
Following a storming March, in which some sectors made double-digit gains, April was more subdued overall.
The month was dominated by the war between Russia and Ukraine, which has continued to affect fuel prices and therefore inflation.
However, oil had a quiet April, with the Brent crude spot price starting and finishing at $107 (£85.42) per barrel, while commodities such as gold sold off slightly (down $30 at $1,911 per ounce).
Investors may get more clarity about the direction of travel for interest rates this week when both the Federal Reserve and Bank of England hold their respective meetings. The two are expected to tighten monetary policy, although there are questions about how far they will go.
Ben Yearsley, director at Fairview Investing, said: “It’s only the size of the rise that’s in doubt. Both venerable institutions are playing catch-up and both arguably aren’t having any impact on inflation.”
Turning to markets, most major sectors were down last month. The IA India/Indian Subcontinent sector topped the table, with the average fund returning 2.3%, while a small number of other areas made marginal positive gains, as the below table shows.
Source: FE Analytics
Overall, April was about capital preservation, with the worst-hit fund sectors suffering much larger losses than the gains from the top ones.
“Stock markets had a dismal month, apart from the UK. We are bucking the global trend, helped by rising rates and surging oil prices. The FTSE 100 rose a creditable 0.8% in April, compared with a fall of 8.7% in the S&P 500 and sizeable falls in the Far East and emerging markets,” Yearsley said.
“The boring, stodgy sectors led the FTSE, with electricity and pharma doing especially well in April – the UK continues to benefit from being ‘tech-lite’.”
The IA Technology & Technology Innovations sector was the worst affected, dropping a further 7.2%, taking its year-to-date loss to 17.3% and wiping out all the gains it made in 2021.
Another sector on the way down was IA Latin America, which suffered a pull-back as the hot money that flew into the sector last month on the back of higher oil prices was withdrawn.
Turning to individual funds, former winners of the tech trade continue to languish at the bottom of the rankings. A number of Baillie Gifford funds were at the bottom of the pile in April, including Baillie Gifford American, which fell 18.6%.
It could have been worse, however, if currency effects hadn’t helped returns – the US dollar was up 4.2% against the pound in April, helping UK investors with exposure to US assets.
Worst of the lot was Nikko AM ARK Disruptive Innovation, which dropped 23.8% in the month.
Source: FE Analytics
The table-topping funds were a mixed bag, with the only common thread being the uncorrelated nature of the underlying strategies.
Commodities continued to do well, while AQR Capital was the biggest winner in April with two entries in the top five. The AQR Style Premia fund took the top spot, up 12.9% for the month.
On the investment trust side, the move to take risk off the table was apparent, with three of the five worst-performing sectors investing in smaller companies, while the North American sector sat sixth.
Source: FE Analytics
Small caps tend to fall out of favour when investors move their cash towards safer assets, something that can also be seen in the top performers. These are all alternative strategies, which have become popular in recent months as stocks have stumbled and bonds have offered little protection.
Yearsley said: “The fact that the top five are all invested in alternatives is fascinating. In a lower-growth but higher-inflation environment, will it be those portfolios willing to embrace alternatives such as infrastructure and forestry that prosper?”