In what has been a tricky year for investors to make money, we reveal the 10 worst-performing funds of 2018, which have all racked up losses of more than 20% year-to-date.
It has been a tricky year for investors to make money, with volatility returning with a vengeance for both developed and emerging market regions.
While some active funds have turned a profit for investors in 2018, the reality is that the vast majority have racked up losses. In some cases the declines have been sizeable, with specialist funds dominating the list of the top 10 worst performers.
The list, complied by stockbroker Willis Owen and dated from the start of the year to 10 December, contains four specialist funds.
Two gold funds feature: TC South River Gold and Precious Metals and MFM Junior Gold, which had over the period lost 27.9% and 22.7% respectively. Given the uptick in volatility this year, one would expect gold-focused funds to have fared better, due to the precious metal’s defensive characteristics.
But, despite gold being widely viewed as one of the few safe haven assets that protects investor capital during pronounced market downturns, it has historically had an Achilles’ heel – a strong US dollar – and this impacted its fortunes this year.
The value of the dollar typically has an inverse relationship with the gold price. When the dollar rises, gold becomes more expensive for international investors to buy, because gold is a dollar-denominated commodity.
Adrian Lowcock, head of investments at Willis Owen, adds: “While gold is a good defensive asset for volatile markets, it tends not to react much differently in the short term and only really protects over the medium term.”
The other two specialist funds on the list are run by the same fund manager: Jupiter India and JGF Jupiter India Select, overseen by Avinash Vazirani. The strong US dollar and rising oil price have hampered the region, with the latter effectively being a tax rise for India’s imported energy-intensive economy. Its weak currency has also not helped, negatively impacting UK investors.
Over a longer time horizon Jupiter India has served investors well, up 110% on a five-year view, but the sizeable paper losses year-to-date highlight the risks associated with investing in single-country funds over a short time period.
Elsewhere, three of the funds in the bottom 10 performers invest in UK equities, including a fund managed by Neil Woodford: Quilter Investors UK Equity Income II. It is managed on a similar basis to Woodford’s flagship Woodford UK Equity Income fund, but it has lost notably more, down 27% versus 15% over the same time period. L&G UK Alpha Trust and Majedie UK Smaller Companies also fared badly, down 23.3% and 22.5% respectively.
Billions of pounds exited UK funds of all shapes in 2018 – the continuation of a trend that first manifested itself following the Brexit vote in June 2016. Lowcock adds that Brexit is putting off investors, noting this is a dominant trend across both professional and retail investors and is reflected in industry-wide data.
10 worst-performing funds
|Funds||Percentage return (%)|
|TC South River Gold and Precious Metals||-27.93|
|Quilter Investors UK Equity Income II||-27.25|
|JGF-Jupiter India Select||-25.54|
|Comgest Growth Gem Promising Companies||-24.75|
|L&G UK Alpha Trust||-23.28|
|Quilter Investors Equity 1||-22.85|
|MFM Junior Gold||-22.67|
|Majedie UK Smaller Companies||-22.46|
|Merian Europe (Ex UK) Smaller Companies||-22.26|
*Source FE Analytics, performance from start of 2018 to 10 December 2018 in pounds sterling on a total return basis
On a sector level, the worst-performing sectors were dominated by emerging markets and Asia, led by China. Lowcock adds: “A recovery in the stock market that started in 2016 vanished in 2018. Emerging markets entered a bear market in 2018 as a strong US dollar driven by interest rate rises and US-Chinese trade war impacted on the sector.”
Europe also disappointed, and worst of all the Investment Association’s sectors was European smaller companies, with the average fund losing 13% from the start of the year to 10 December.
10 worst-performing sectors
|Investment association sector||Percentage return (%)|
|European Smaller Companies||-13.33|
|Global Emerging Markets||-11.03|
|UK Smaller Companies||-10.68|
|UK All Companies||-10.24|
|Europe Excluding UK||-9.83|
|UK Equity Income||-9.58|
|Europe Including UK||-9.07|
|Asia Pacific Excluding Japan||-9.01|
|Asia Pacific Including Japan||-6.86|
*Source FE Analytics, performance from start of 2018 to 10 December 2018 in pounds sterling on a total return basis.