To say that the performance of markets last year was an improvement on 2018 would be a huge understatement.
As the Federal Reserve looked set to continue tightening policy, reducing liquidity, and the relationship between the US and China deteriorated, it was difficult to see much cause for optimism early in 2019.
Nevertheless, a reversal by the US central bank and the prospect of a US-China trade deal helped boost sentiment. UK investors also benefited as the December general election returned a large majority for the ruling Conservative party and provided greater certainty for the domestic economy.
After a loss of 3.79 per cent in sterling terms for the MSCI AC World index in 2018, the index rallied by 21.71 per cent last year.
Given the change in market conditions, Trustnet revisited the best & worst performing strategies of 2018 to find out how they got on in 2019.
As the chart below shows, most of the top-performing strategies of 2018 made positive returns again in 2019, with many showing a marked improvement on the previous year’s showing.
Source: FE Analytics
However, there were three funds from the top-20 in 2018 that made a loss last year: Wellington Global Total Return, Wellington World Bond and Vanguard Japan Government Bond Index.
Having made a total return of 11.33 per cent during 2018, Wellington Global Total Return made a loss of 1.34 per cent last year.
The $161m absolute return fund is managed by Wellington’s global bond team. It invests in a portfolio of fixed income assets, seeking absoluter returns above its cash benchmark over the medium-to-long term.
Its sister fund – Wellington World Bond – made a smaller loss of 0.12 per cent during 2019 after a double-digit gain of 10.74 per cent during the previous year.
Meanwhile Vanguard Japan Government Bond fell by 1.17 per cent last year.
However, the best performer of 2018 – Polar Capital Healthcare Opportunities – also delivered a strong performance last year, making a total return of 14.35 per cent.
The $1.5bn, four FE fundinfo Crown-rated strategy is overseen by Gareth Powell. It topped the performance tables in 2018 with a return of 15.51 per cent.
However, it wasn’t the biggest gain recorded by a 2018 top-20 performer.
That went to five Crown-rated Brown Advisory US Equity Growth, which made a 34.72 per cent return last year. The $1.1bn US equity fund, managed by Kenneth Stuzin, invests in mid- to large-cap companies with strong & sustainable revenues, cash flow and earnings growth. It had made a return of 11.34 per cent during the more challenging conditions of 2018.
Sister strategy Brown Advisory US Sustainable Growth also delivered a strong 30.47 per cent gain last year, after making a return of 11.4 per cent in 2018.
The $430.1m fund, managed by David Powell and Karina Funk, targets companies that the managers consider to have “sound fundamentals and business models which are sustainable over the long term”.
Given the strength of the rally last year which lifted almost all assets, it’s little surprise that almost all of the worst-performing funds of 2018 delivered a positive total return during 2019.
Just two funds of 2018’s worst-performing strategies made a loss again last year, against a vastly improved economic picture and more positive sentiment in most markets.
Source: FE Analytics
Invesco Korean Equity was the worst performer of the bottom-20 funds from 2018, making a 5.24 per cent loss in 2019 (it was down by 23.41 per cent in 2018).
The Korean equity market has been affected by slowing Chinese growth and trade tensions with Japan, as well as some negative implications from government policy, Invesco noted.
The only other fund from 2018’s bottom-20 to record a loss last year was the L&G UK Alpha Trust, which – after a 22.05 per cent loss in 2018 – was down by 2.74 per cent in 2019.
This small- and mid-cap fund was taken over by Rod Oscroft at the start of 2018 following the departure of former manager Richard Penny to CRUX Asset Management.
The worst performer of 2018 – ES Gold and Precious Metals – returned a respectable 13.07 per cent gain in 2019 following a 28.86 per cent loss during the previous year.
It benefited from positive trends for gold prices which rose early in the year against an uncertain policy and geopolitical backdrop.
There were also some strong performances to be found among the bottom performers of 2018.
The best performing strategy was Allianz All China Equity fund, a $288.5m vehicle overseen by Anthony Wong and Sunny Chung. Having made a loss of 21.87 per cent in 2018, the Chinese equity fund recorded an impressive 41.85 per cent gain last year.
Another Chinese equity strategy – GAM Star China Equity – also rebounded strongly after a loss of 23.90 per cent in 2018, making a gain of 32.83 per cent last year.