January and February have seen investors on a huge and at times quite scary rollercoaster. The FTSE 100 blue chip index dropped by over 11% from its high point of over 6,200 at the start of the year to just above 5500 by February 11 – and then bounced energetically back. It was a pattern mirrored across markets worldwide.
Some of the sectors to benefit most over this period of global volatility have been those that struggled the most over the past couple of years, with spectacular gains over the past month. According to Trustnet, the five best performing fund sectors over the month to 4 March look like this:
- N Am Smaller Cos +9.5%
- Global Emerging Markets +8.8%
- Asia Pacific ex Japan +8.7%
- China/Greater China +8.6%
- Asia Pacific inc Japan +8.1%
The bottom of the table is packed with the relatively safe haven sectors that have helped to mitigate volatility over recent months – index-linked gilts, sterling and strategic corporate bonds, targeted absolute returns and money market funds. Rather depressingly, UK Smaller Companies are in there, only eighth from the bottom of the 37-sector table with a 0.6 per cent return over the month.
Turning to investment trusts, the past month’s comeback has been markedly more dramatic, and interestingly most of the sectors at the very top of the table over this period are quite different from the open-ended fund line-up. The top five over one month looks like this:
- Litigation +18.3%
- Commodities and natural resources +11.2%
- European Emerging Markets +10.2%
- Country Specialists Europe + 8.4%
- North American Smaller Companies +7.9%
The strength of the investment trust commodities sector is a reflection of the return of risk appetite over recent weeks, underpinned by an upturn in oil prices, as well as the emerging markets comeback and in particular news of further stimulus for China’s economy.
In contrast, the UK has had a lacklustre couple of months. The investment trust UK Equity Income sector gained just 1.2 per cent in February, while UK All Companies and UK Smaller Companies were both marginally lower.
Where have investors been putting their money? On the fund front, broker Interactive Investor saw a surge of interest in tracker funds during February, with no less than six – five of them Vanguard funds – among the top ten most popular funds. The table was topped by the globally focused Fundsmith Equity.
Investment trust sales were dominated by Scottish Mortgage, which has led the pack every month but one for the past two years. Interestingly, UK equity income choices dominated the top ten, with City of London, Finsbury Growth & Income and Edinburgh Investment Trust all claiming a slot.
The top sales also included BlackRock World Mining trust, which had a shocking period during the extended commodities rout. It lost 65% in share price value over the five years to 4 March, but has bounced back with a vengeance, gaining 31% in February alone.
