Investment funds showed a more consistent performance in the first quarter of 2019 as equity markets rebounded.
BMO Global Asset Management’s ‘Multi-Manager FundWatch’ survey showed the percentage of UK funds showing top quartile returns over a three-year period rose to 2.2%. This was up from 0.54% in the last quarter of 2018, when markets were “tumultuous”.
In the latest quarter, the 2.2% represents 24 funds out of 1,102 and marks a return to “more normal levels”, albeit at the lower end of the scale, following a “torrid” fourth quarter in 2018.
The most reliable returns since the third quarter of 2018 have been from the IA UK Smaller Companies Sector, with an impressive 10.42% of funds achieving top quartile consistency over the rolling three years to the first quarter of 2019.
The IA Sterling Corporate Bond and IA Emerging Markets sectors were the next most consistent with 8.9% and 5.2%, respectively.
BMO GAM said that when the hurdle rate was lowered to above median, 122 of the 1,102 funds (11.1%) delivered above median returns consistently, which is up from 10.8% from the previous quarter. All sectors except the IA Global Bond Sector delivered on this measure, with the IA Sterling Corporate Bond sector performing particularly strongly, with 25.3% of funds producing returns above the median.
The IA China/Greater China was the best-performing sector, gaining 14.7%.
Kelly Prior, investment manager in BMO GAM’s multi-manager team, said: “The initial nervous response to a change in tone from the US Federal Reserve in Q4 2018 transformed to euphoria in Q1 2019, with the central bank taking a more cautious stance.
“However, something doesn’t quite add up,” Prior added. “This quarter saw a significant drop in yields from government bonds; the US curve inverted in part and German bunds returned to negative territory, at the same time, equities surged. It will certainly be interesting to observe how this dynamic plays out throughout the rest of the year and into 2020.”
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