Forty-two funds in the IA universe would have made investors more than 400 per cent even if they had sold at the bottom of the market this year – but they would have had to have bought in at the lowest point following the financial crisis to have achieved these gains.
The best time to buy an investment and the worst time to sell is when the market reaches its lowest point, but this is easier said than done – aside from the impossibility of timing this moment, real life often gets in the way.
And while you may be lucky enough to be in possession of a lump sum when the market bottoms out – and brave enough to invest it when every headline is screaming “financial apocalypse” – you may not be so fortunate when the next crisis rolls around, with the conditions that lead to a crash also often responsible for an economic downturn, job losses and tighter lending conditions.
Yet even if a sudden and urgent need for money leads you to sell your investments when you know you shouldn’t, you could still have realised spectacular gains – so long as you bought in at the optimal time and held on for the long term.
There are 1,872 funds in the IA universe with a track record stretching back to when the MSCI World bottomed out, in sterling terms, following the financial crisis, on 4 March 2009. Between that point and the index’s low this year, on 16 March, 42 funds made more than 400 per cent, 120 made more than 300 per cent, 275 made more than 200 per cent and 958 made more than 100 per cent. Just 11 funds lost money.
The MSCI index made 239.23 per cent over this time.
Performance of index March 2009 to March 2020
Source: FE Analytics
Unsurprisingly, funds focused on the US and the tech sector that dominates this market cycle top the list of best performers. The lengthy hangover that followed the bursting of the dotcom bubble meant that tech was still out favour when the financial crisis hit – as a result, many stocks in the sector were modestly priced as they introduced the products and services that have transformed the way we live and work over the past decade or so. In 2007, for example, Apple sold its first iPhone, Netflix streamed its first video and YouTube launched.
Twenty-seven of the funds that made more than 400 per cent over the period in question have a focus on either tech, biotech or the US, including eight of the top-10. Polar Capital Global Technology is top of the pile with gains of 734.98 per cent.
Top-10 funds March 2009 to March 2020
Source: FE Analytics
Away from tech and the US, another theme with a heavy representation at the top of the charts is smaller companies, accounting for 12 names that made more than 400 per cent. Two of these have a crossover with the US sector. Two funds focused on India – GS India Equity Portfolio and Stewart Investors Indian Subcontinent Sustainability – also made the list.
However, it is worth noting that while tech funds made spectacular gains from “trough to trough” – and quickly bounced back well beyond this year’s starting levels – a warning from history shows investing in the winners of the last cycle is not a one-way bet, even if you buy them at what you think is the bottom of the market.
There are just 11 funds that would have lost investors money had you bought them at the bottom of the market in March 2009 and held them to this year’s lowest point. Nine of these are focused on commodities.
Yet looking back at the winners from the bottom of the market in March 2003 – following the bursting of the dotcom bubble and the run-up to the war in Iraq – and the lowest point after the financial crisis shows the list of 20 best performers is dominated by funds with a focus on natural resources or Latin America, a region that made much of its money during this time by exporting commodities.
Top-10 funds March 2003 to March 2009
Source: FE Analytics
This was a much less lucrative period – the MSCI World index made just 26.98 per cent over this time and only 98 funds made more than 100 per cent. The only themes represented on this list and the top performers from 2009 to 2020 are smaller companies and India.
Performance of index March 2003 to March 2009
Source: FE Analytics
The list of loss-makers over this period is dominated by bond funds – food for thought for those who buy them for their perceived capital-protection properties. It is also worth noting the other major theme at the bottom of the list is exposure to the US – suggesting investors may be able to find the winners of this cycle among the losers of the last one.