Energy funds were an investor favourite in 2021, with some of the previous year’s worst funds topping the performance tables during the past year.
According to Ben Yearsley, investment director at Fairview Investing, Schroder ISF Global Energy was the top performing fund of 2021, with a return of 48.84%, followed closely by TB Guinness Global Energy, with a return of 45.72%.
Bonds and commodities also piqued investor interest over the past 12 months, as the oil price surged from $51.80 to a high of $86 per barrel of Brent, before settling at around $78 a barrel and as gas prices in Europe “went through the roof in the Autumn”.
The four worst-performing funds of 2020 were all in 2021’s top six best performers and were all energy funds.
Yearsley added that government bond markets had a poor year – at the start of 2021, the UK 10-year had a yield of 0.26% and the equivalent US Treasury yielded 0.93%, while today, those yields are 0.97% and 1.51% respectively.
Away from energy, India was the “surprise” of last year, with several Indian equity funds delivering outperformance, including Alquity Indian Subcontinent, which returned 43.6%, making it the seventh best-performing fund of 2021.
The best-performing India fund with a return of 45.62% was Nomura India Equity, which ranked third for performance in 2021.
“When you look back at the surging Covid rates in the Spring in India, it would have been a brave person to have made India one of the go-to stockmarkets,” Yearsley said. “However, a successful vaccination programme and political stability have led to the long-term growth story reasserting itself.”
Yearsley observed that the 10 worst-performing funds of the year were “mixed” in terms of region and asset class.
“China funds were unsurprisingly near the foot after investors took fright at renewed regulatory crackdowns – however, who hadn’t factored political risk into a China thesis?” he said.
Fidelity China Consumer lost 24.12% over the year, while the GAM Star China Equity fund was down 25.97%. Yearsley added that “political shenanigans” in Latin America, and Brazil in particular, meant that some of the funds invested in those regions performed poorly. HSBC GIF Brazil Equity was the third worst-performing fund of 2021, generating a return of –28.1%, while JPM Brazil Equity returned –25.19% to investors.
According to Fairview Investing’s Yearsley, Garraway Absolute Equity “took the honours” to be named the year’s worst-performer, falling 34.72%. “This fund has to be among the most volatile, as it frequently features either at the top or bottom of the IA universe,” he said.
However, it was closely followed by LF Equity Income, formerly known as the Woodford Equity Income fund, which fell 34.43%.
“From a sector perspective Indian funds took the plaudits in the open-ended world, narrowly beating the US, commodities, UK small-cap and, interestingly, the ‘Property Other’ sector,” Yearsley added. “The Latin American sector was the worst-performing last year, closely followed by China. The next 13 worst performing sectors were all fixed interest – it’s hard to deliver positive performance in the face of rising yields.”
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