A tiny proportion of funds have actually managed to make money for investors so far in 2022.
Many of us find investing challenging. Without the time to go through the Financial Times each day, picking out individual stocks to back, lots of investors instead opt for funds.
Funds are made up of stocks in a range of different businesses, often around a singular theme, like smaller companies in the UK or emerging markets across the globe.
The idea is that the fund managers in charge of these funds make the decisions on where to put their investors’ cash, and we simply reap the rewards of those decisions.
The trouble is that picking stocks is tricky for the professionals too.
Indeed, the difficulty in picking winning investments has been laid bare by new research which suggested that just 6% of investment funds have delivered returns so far this year.
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A torrid time
Analysis by Quilter Cheviot dug into the performance of funds which fall within the Investment Association.
Given there are around 4,000 individual funds on sale in the UK that are classified to the Investment Association’s sectors, that’s no shortage of potential investments.
However, astonishingly few of them are actually managing to deliver a return of any sort to investors. Indeed, the research found that a paltry 6% of funds have made a positive return in the first half of 2021.
In other words, the vast, vast majority of funds open to investors will have lost you money over the initial six months of the year.
As Nick Wood, head of fund research at Quilter Cheviot, put it, 2022 has been a “torrid time for most investors”.
The best performing investment funds
So which have been the funds which have managed to stand out from the crowd in actually delivering a return to investors?
According to the Quilter Cheviot analysis, these are the top 10 performing funds over the first six months of the year, and the returns they have delivered so far in 2022.
|
Fund |
Total returns in 2022 |
|
BGF World Energy Fund D2 |
39.47% |
|
Schroder International Selection Fund Global Energy |
34.64% |
|
Goldman Sachs North America Energy & Energy Infrastructure Equity |
34.37% |
|
TB Guinness Global Energy |
31.06% |
|
Vontobel Commodity |
30.72% |
|
Multicooperation GAM Commodity |
30.47% |
|
Guinness Global Energy |
28.05% |
|
AQR Systematic Total Return |
27.95% |
|
AQR Managed Future |
27.89% |
|
LO Funds Commodity Risk Premia |
25.57% |
Perhaps, given the incredible state of the energy market, it’s no huge surprise that funds with a large energy exposure have performed well.
However, the table really does emphasise the importance of this sector for investors in 2022 thus far, with energy-focused funds taking four of the top five spots, and eight of the top 10.
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The worst performing investment funds
Now let’s take a look at the other end of the table, and the funds which have delivered the worst performances so far in 2022:
|
Fund |
Total returns in 2022 |
|
Liontrust Russia |
-53.08% |
|
Morgan Stanley US Growth Fund |
-52.51% |
|
Nikko AM Ark Disruptive Innovation |
-52.08% |
|
Morgan Stanley US Advantage Fund Acc |
-49.44% |
|
Baillie Gifford American |
-49.10% |
|
Morgan Stanley Global Insight |
-48.93% |
|
Fidelity Emerging Europe, Middle East & Africa |
-48.72% |
|
Morgan Stanley US Advantage |
-47.79% |
|
T. Rowe Price Global Tech Equity Qd |
-46.84% |
|
T. Rowe Price Global Tech Equity CAcc |
-45.43% |
Top ‒ or should that be bottom? ‒ spot is taken by the Liontrust Russia fund, which as the name suggests is focused on the Russian market.
Given the war in Ukraine, and the fact that this fund is currently suspended, it’s not exactly a shock that it has been a disastrous pick this year.
Quilter points out that the Fidelity emerging market fund in this list also suffered as a result of having significant exposure to Russia.
The other funds that have had such an awful first half of the year are heavily biased towards higher growth stocks, according to Quilter, a tactic that hasn’t paid dividends given the economic difficulties.
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Don’t panic!
It’s very easy to look at figures like those in the tables above and resolve to make quick action. Nobody likes to see their investments dropping in value by such large margins, over a relatively short period.
However, with investing it’s always important to take a more long-term view.
The reality is that there will always be some volatility in the markets, and the fact that so many funds have had a rough time this year says more about the general economic situation than it does about their qualities as individual funds.
Now, if they have been delivering poor performance compared to the rest of their sector for a longer period of time, then of course it makes sense to think carefully about whether they are really worth having in your portfolio.
The BestInvest Spot the Dog report is excellent for identifying the ‘dog’ funds which have underperformed for a more extensive period than half a year, and we cover each edition here on loveMONEY.
But investing is a long-term pursuit. If you know what you are looking for from a particular fund, if it has the underlying features that you want from your investments, then it’s not always wise to ditch it at the first sign of difficulties.
It’s also worth remembering just how difficult it is to beat the market. Fund managers are paid a lot of money, and yet relatively few manage it at the best of times, let alone during difficult periods like we are currently seeing.
If you don’t fancy gambling on backing the right fund manager, then you may be better off sticking to tracker funds which replicate the performance of an individual index.
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