Markets have had a volatile 2020, starting the year positively on the back of an easing in the trade war between the US and China before the coronavirus (Covid-19) outbreak took hold. 
As Covid-19 transformed into a global pandemic, markets experienced some of the quickest and steepest corrections in financial history and economies around the world began shutting down.
What has followed has been unprecedented stimulus packages from governments and central banks worldwide, and markets bounced back slightly even though economies are beginning to fall into recession territory.
Against this backdrop, Trustnet has looked at the largest 25 Investment Association funds and how their performance has held up in 2020 so far.
Source: FE Analytics
At the top of the list is the Pimco GIS Income fund with £45.8bn worth of assets. It is run by US-based managers Alfred T. Murata and Daniel Ivascyn.
The strategic bond fund holds a large amount of mortgage-backed securities, as well as investment grade bonds from governments and corporates. It has made a 7.15 per cent loss year to date, putting it in the bottom quartile of its peer group.
The second largest fund in the list is the £18.6bn Allianz Income and Growth fund. It has fallen 8.55 per cent year-to-date; it’s a member of the IA Specialist sector, so doesn’t have a quartile ranking.
The portfolio has about 60 per cent in fixed-income securities such as bonds and convertible debt, but nine out of its 10 top holdings are equity stakes in the US big tech companies that include Apple, Microsoft and Amazon.
While both funds are some of the biggest in the Investment Association universe, the bulk of their assets are held by European investors so they might not be the most familiar names to those in the UK. The third-largest fund, however, is much more of a household name.
The £18.3bn Fundsmith Equity fund, run by FE fundinfo Alpha manager Terry Smith (pictured), has lost just 1.35 per cent over 2020 so far. This puts in the top quartile of the IA Global sector.
As the shutdown of economies creates difficulties for companies who operate with high leverage and are thus vulnerable to disappearing revenues and cash flows, Fundsmith’s strategy of selecting companies without significant leverage has helped it avoid some of the hardest-hit stocks.
The fund’s stakes in Microsoft, Novo Nordisk, Coloplast, Reckitt Benckiser and Kone were March’s biggest contributors of performance.
Some of its top 10 holdings include US technology companies Paypal and Facebook, as well as consumer staples companies Pepsico and McCormick.
The quality-growth manager touts a simple strategy of ‘buying good companies’, ‘not overpaying’ and ‘doing nothing’.
In his latest letter to investors, Smith explained that the fund held up as he would have “expected, hoped and predicted in a bear market”.
Performance of Fundsmith Equity vs sector and index in 2020
Source: FE Analytics
Of the six giant funds in the list that have had positive returns year-to-date, two were Morgan Stanley-run global equity strategies.
The £12.3bn Morgan Stanley Global Brands fund, run by FE fundinfo Alpha Manager William Lock, invests in quality-growth companies, with an emphasis on the quality element. It returned 1.13 per cent year-to-date.
FE fundinfo Alpha Manager Kristian Heugh’s £8bn Morgan Stanley Global Opportunity fund is also a quality-growth strategy, but has a stronger emphasis on growth. It has returned 3.4 per cent year-to-date, making it the seventh-best performer in the 334-strong IA Global sector.
Two other funds in positive territory were global bond funds. The £11.2bn Pimco GIS Global Bond fund was the highest performing fund in the list, returning 7.84 per cent year-to-date and ranked in the top quartile of funds in its sector.
The other positive returning global bond strategy was the £13.2bn Vanguard Global Bond Index fund, which is the fifth largest in the list, returning 2.48 per cent year-to-date; this is a second-quartile result.
The Vanguard-run passive fund was the largest index fund in the list, of which 10 out of 25 were index funds. However, UK equity passive funds were the lowest returning in the list – reflecting the fact that the UK market has fallen harder than most others in 2020.
The iShares UK Equity Index and the Vanguard FTSE U.K. All Share Index trackers made respective losses of 20.18 cent and 18.88 per cent, putting them in the IA UK All Companies sector’s second quartile.
In contrast, FE fundinfo Alpha Manager Nick Train’s £5.4bn LF Lindsell Train UK Equity fund – which is the biggest active fund in the peer group but not one of the Investment Association’s 25 largest funds – has fallen 12.62 per cent in 2020, which is the 14th best return of the 254 funds in the sector.
Performance of LF Lindsell Train UK Equity vs sector and index in 2020
Source: FE Analytics
The £8.7bn Invesco Global Targeted Returns (UK) fund is the largest and only targeted absolute return fund in the list, returning 1.03 per cent year-to-date versus the average IA Targeted Absolute Return member’s loss of 4.12 per cent.
Finally, the £7.7bn Vanguard LifeStrategy 60% Equity fund – which has been one of the most popular funds with financial advisers in recent years – has dropped 5.38 per cent this year, putting it in the first quartile of the IA Mixed Investment 40-85% Shares sector.