Willis Owen reveals the best and worst sectors and funds in August 2020: Gilt funds tank as spectre of inflation returns
- UK Smaller Companies sector leads markets in August
- Japanese equities rebound from July sell-off as Abe resigns
- UK Gilts out of favour as inflation surprises on the upside in August
Adrian Lowcock, Head of Personal Investing, Willis Owen says:
“The recovery in the UK and globally continues to defy many investors’ expectations. Even though cases of COVID-19 are still on the rise, investors have focused on the huge amount of QE put into the system, whilst positive consumer spending in the US for July also boosted confidence that there could be a strong economic rebound. The FTSE 100 has continued to lag global equity markets, but the UK Smaller Companies sector delivered a strong month and was the second best sector as the pound rallied, making gains against the leading currencies. This happened even though economic data suggested the UK suffered the largest decline in GDP across Europe during the lockdown.
“Elsewhere, Japanese smaller companies posted a rebound from July’s fall and led global sectors even after losing some ground as Shinzo Abe stepped down because of a long-running illness, announcing his resignation last week. His departure has raised concerns amongst investors over the future of Japan and the longevity of ‘Abenomics.’”
Technology again performed in August amid the hype around the stock splits for both Apple and Tesla shares – both companies rallied at the end of the month as the split went through on the last day of August.
At a fund level, LF Odey Absolute Return fund led the way in August. This high conviction strategy can be extremely volatile as bets by its fund manager, James Hanbury, often result in big gains or losses. Premier UK Growth benefited from its bias towards UK smaller companies, including the recovery in Boohoo’s share price and a strong performance in Frontier Developments, its two largest holdings.
10 best-performing sectors
|
Investment Association Sector |
Percentage |
|
Japanese Smaller Companies |
5.7 |
|
UK Smaller Companies |
5.52 |
|
Technology & Telecommunications |
5.21 |
|
North America |
4.98 |
|
Japan |
4.61 |
|
Asia Pacific Including Japan |
4.56 |
|
European Smaller Companies |
4.2 |
|
China/Greater China |
4.04 |
|
Global |
3.86 |
|
North American Smaller Companies |
3.44 |
Source: FE Analytics, performance from 31st July to 31st August 2020 in pounds sterling on a total return basis
10 best-performing funds
|
Funds |
Percentage |
|
LF Odey Absolute Return |
13.16 |
|
Aptus Global Financials |
11.87 |
|
LF Access Long Term Global Growth Investment |
11.58 |
|
SVM Continental Europe |
11.17 |
|
Premier UK Growth |
10.63 |
|
Baillie Gifford Long Term Global Growth Investment |
10.57 |
|
Guinness Sustainable Energy |
10.47 |
|
New Capital US Growth |
10.44 |
|
Aubrey Global Emerging Markets Opportunities |
10.36 |
|
Alquity Indian Subcontinent |
10.29 |
Source: FE Analytics, performance from 31st July to 31st August 2020 in pounds sterling on a total return basis
On the downside, August was a poor month for defensive assets as UK government bond yields rebounded having fallen to record low levels on the back of concerns of a US/Chinese trade war, which began to ease. This, combined with renewed optimism of a stronger recovery because of better than expected US consumer spending data, as well as higher inflation, led investors to shift away from defensive assets.
LF Equity Income was the worst performer, but this is down to the fact that investors received a third cash payment as the fund continues to be wound up. Discounting this, Latin American funds featured significantly in the worst performing funds lists as COVID-19 continues to spread. The region has a bias towards cyclical stocks such as mining companies, which have underperformed as lockdowns hurt economic activity.
10 worst-performing sectors
|
Investment Association Sector |
Percentage |
|
UK Index Linked Gilts |
-5.39 |
|
UK Gilts |
-3.83 |
|
Global EM Bonds Local Currency |
-1.66 |
|
Global Bonds |
-0.9 |
|
Sterling Corporate Bond |
-0.86 |
|
Global EM Bonds Blended |
-0.65 |
|
UK Direct Property |
-0.02 |
|
Global EM Bonds Hard Currency |
0.07 |
|
Sterling Strategic Bond |
0.14 |
|
Mixed Investment 0-35% Shares |
0.27 |
Source: FE Analytics, performance from 31st July to 31st August 2020 in pounds sterling on a total return basis
10 worst-performing funds
|
Funds |
Percentage |
|
LF Equity Income |
-37.21 |
|
Scottish Widows Latin American |
-8.41 |
|
Liontrust Latin America |
-8.27 |
|
HSBC GIF Brazil Equity |
-8.17 |
|
Invesco Latin American (UK) |
-7.96 |
|
ASI Latin American Equity |
-7.82 |
|
BlackRock GF Latin American |
-7.57 |
|
Blackrock Institutional Bond Over 15 Year Gilt |
-7.11 |
|
JPM Brazil Equity |
-7.1 |
|
Janus Henderson Inst Long Dated Gilt |
-6.53 |
Source: FE Analytics, performance from 31st July to 31st August 2020 in pounds sterling on a total return basis
-Ends-
Enquiries
Adrian Lowcock, Chris Tuite
Head of personal investing Director & Head of Consumer Finance
Willis Owen MRM London
07849 846387 020 3326 9925
Adrian.lowcock@willisowen.co.uk 07471350180
Notes to Editors
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