• A breakthrough year for sustainable funds
• Baillie Gifford sweeps the performance board, thanks in part to Elon Musk
• Most popular funds and shares with DIY investors
• 4 of the 5 worst performing IA sectors are all in the UK
Laith Khalaf, financial analyst at AJ Bell:
“It’s been a year when markets continued to reward the long running trends of technology and secular growth, leaving economically sensitive stocks out in the cold. In that sense, 2020 was really a concentrated microcosm of market performance over the last ten years.
“However, a vaccine may serve to turn things on their head and we have already seen some evidence of that in recent weeks, as cyclical stocks have sprung back to life. Vaccines won’t suddenly restore the global economy to rude health, but it’s the direction of travel that matters to markets and 2020 presents a very low bar to beat.
“Here in the UK a rotation towards cyclical stocks also hinges somewhat on the Brexit negotiations. A no deal scenario is likely to eat up recent gains, without providing a permanent resolution that can allow UK domestic stocks to draw a line under the last four years and start to make progress from a fresh start.
“2020 has certainly not been a good year for the UK stock market, but given the terrible economic shock of the pandemic, a 7% fall in the average UK equity fund isn’t actually such a bad result. During the financial crisis, the typical UK equity fund fell by about 30% over the course of 2008.
“The same medicine which revived stock markets after the financial crisis has been dished out to deal with the pandemic- a massive injection of monetary stimulus by central banks and large fiscal interventions by governments. This time around it came a lot quicker though, because the path was already well trodden. Central banks may not have exactly eliminated boom and bust, but they do seem to have shortened the market cycle by reaching for the QE cookie jar whenever a crisis rears its head.
“2020 will also be remembered for the record flows into responsible investment strategies. Likely as not there is some greenwashing mixed up in the fanfare, but there is no doubt it’s been a genuinely ground-breaking year for the ethical fund industry, which has spent most of the last twenty years going sideways. We’re likely to see more money flow into responsible strategies as investor demand grows, new funds are launched and existing funds build up longer track records.”
Most popular funds and shares with DIY investors
“Fund investors have largely continued to back the growth theme that has been successful for the last ten years, choosing managers like Terry Smith, Nick Train and Hugh Yarrow to populate their portfolios. These managers have done more than enough to earn their spurs, though they may find life a bit tougher if there is a revival in the more economically sensitive stocks preferred by value managers.
“While there are some signs that may be taking root, the philosophy of buying companies that can compound their growth year in year out is still a sound strategy for the long term, so Smith, Train, Yarrow et al. won’t be changing their spots anytime soon. Investors should try to spread their portfolio across growth and value funds, so they don’t spend a decade in the wilderness, as anyone who has been parked entirely in the value camp for the last ten years will attest.
“The growth preference continues in the list of most popular investment trusts. Technology has also been a clear favourite here, in a year when global consumers and businesses have relied on digital solutions like never before.
“Share investors have been more contrarian in their approach, with the most popular stock picks falling squarely in the value bucket. Stock investors are usually a bit more active in terms of trading activity and the big market fall in March provided an opportunity to go bargain hunting for some of the cyclical companies that took a big hit from the pandemic”
|
Funds |
Shares |
Investment Trusts |
|
Fundsmith Equity |
Lloyds |
Scottish Mortgage IT |
|
Vanguard Lifestrategy funds |
BP |
Scottish IT |
|
Lindsell Train Global Equity |
Royal Dutch Shell |
City of London |
|
Baillie Gifford American |
Glaxosmithkline |
Finsbury G&I IT |
|
Polar Capital Global Technology |
IAG |
Polar Capital Technology |
|
Fidelity Index World |
Aviva |
Smithson |
|
Fidelity Global Special Situations |
Rolls Royce |
F&C IT |
|
Baillie Gifford Positive Change |
Legal & General |
Allianz Technology IT |
|
TB Evenlode Income |
EasyJet |
L&G Global Tech |
|
Baillie Gifford Global Discovery |
BooHoo |
Monks IT |
|
Source: AJ Bell Youinvest most purchased investments 01/01/20 - 04/12/20, excluding AJ Bell funds |
||
Best and worst performing funds
“It’s been an incredibly strong year for the fund management group Baillie Gifford, who dominate the top of the performance table this year. Baillie Gifford managers are growth investors, and that’s a style which has been in favour this year and this decade. It also helps that all of their funds in the top ten performers have a significant position in Tesla, which has seen its price increase more than sevenfold so far this year.
“There’s also a notably sustainable theme within the best performers this year, with three funds bearing ESG credentials. It’s been a breakthrough year for responsible investment in the UK funds market and it looks likely that after a long time on the fringes, ethical investment is starting to hit the mainstream.
“Meanwhile it’s been a difficult year for more traditional energy funds thanks to a plunging oil price. The UK stock market has also been a laggard on the international stage which has made life tough for UK Equity funds, particularly those investing in cyclical areas of the market. Smaller companies have bounced back better than the headline index though and consequently Premier Miton UK Smaller Companies is flying the flag at the top of a performance table which is otherwise dominated by international funds.”
|
% total return to 4th Dec |
|
|
Best performers |
|
|
Baillie Gifford American |
109.7 |
|
Baillie Gifford Long Term Global Growth |
88.2 |
|
Baillie Gifford Positive Change |
75.2 |
|
Baillie Gifford Global Discovery |
64.0 |
|
T. Rowe Price Global Technology Equity |
63.2 |
|
Baillie Gifford Global Stewardship |
63.2 |
|
Morgan Stanley US Advantage |
62.0 |
|
MFM Junior Gold |
61.9 |
|
Guinness Sustainable Energy |
57.9 |
|
Premier Miton UK Smaller Companies |
57.5 |
|
Worst performers |
|
|
Premier Miton Optimum Income |
-22.8 |
|
Premier Miton Monthly Income |
-23.2 |
|
TM Stonehage Fleming UK Balanced Income |
-25.0 |
|
GVQ UK Focus |
-25.1 |
|
Jupiter UK Growth |
-26.5 |
|
VT Oxeye Hedged Income Option |
-27.0 |
|
TM Stonehage Fleming UK Equity Income |
-27.3 |
|
Quilter Investors Equity 2 |
-28.3 |
|
Guinness Global Energy |
-34.1 |
|
Schroder ISF Global Energy |
-34.1 |
Source: FE total return 31/12/2019 to 04/12/2020
Best and worst performing FTSE 100 shares
“There’s a distinctly metallic tint to the top of the FTSE 100 leaderboard this year, with gold, silver and copper miners shining. There are also some clear lockdown winners in the table. Ocado’s digital tills rang up sales as more people shopped online, Kingfisher cleaned up as people filled their free time with DIY jobs, and Admiral benefited as less traffic on the road naturally meant fewer accidents and insurance claims.
“It’s been an annus horribilis for the UK’s cyclical stocks, which have suffered greatly at the hands of the pandemic. The airline and aerospace industries have seen their revenues annihilated by travel restrictions and likewise oil producers have seen the price of their main product plummet, as much of the global economy simply shut down for a few months earlier in the year. Banks have also been front and centre of the market sell off, as investors priced in larger loan losses and thinner margins, thanks to even lower interest rates.
“It’s worth noting that Scottish Mortgage Investment Trust tops the best performing FTSE 100 constituents, though here it’s included in the investment trust list below.”
|
% rise/fall in share price |
|
|
Best performers |
|
|
Fresnillo PLC |
77.4 |
|
Ocado Group PLC |
73.0 |
|
Flutter Entertainment PLC |
60.5 |
|
Antofagasta PLC |
54.0 |
|
Polymetal International PLC |
36.8 |
|
Ashtead Group PLC |
33.3 |
|
Hikma Pharmaceuticals PLC |
27.9 |
|
Ferguson PLC |
24.7 |
|
Kingfisher PLC |
23.9 |
|
Admiral Group PLC |
22.8 |
|
Worst performers |
|
|
NatWest Group PLC |
-29 |
|
BT Group PLC |
-29.9 |
|
Standard Chartered PLC |
-31.2 |
|
Melrose Industries PLC |
-31.7 |
|
Informa PLC |
-33.1 |
|
Lloyds Banking Group PLC |
-37.6 |
|
Royal Dutch Shell PLC |
-39.7 |
|
BP PLC |
-41.3 |
|
Rolls-Royce Group PLC |
-44.4 |
|
International Consolidated Airlines |
-59.1 |
Source: Sharepad capital return 31/12/2019 to 04/12/2020
Best and worst performing investment trusts
“Baillie Gifford once again features heavily on the investment trust podium, sporting two of the top three performing trusts in the form of Scottish Mortgage and Pacific Horizon. Scottish Mortgage has high exposure to the global tech sector, but recently took some profits on one of its best performers, Tesla.
“Investment trusts investing in the far east have also had a good year. The coronavirus has generally been well contained in East Asia and the region has its fair share of technology behemoths too, in the form of Tencent and Alibaba, which have posted strong performance this year.
“Bringing up the rear are a number of real estate investment trusts. The pandemic has meant that vast swathes of office and retail space have been redundant for large chunks of the year and has also prompted questions around the longer-term profitability of shopping malls and office blocks.”
|
Total return % |
|
|
Best performing |
|
|
Pacific Horizon Investment Trust PLC |
123 |
|
Edge Performance VCT PLC |
106 |
|
Scottish Mortgage Investment Trust PLC |
90.7 |
|
Seneca Growth Capital VCT PLC |
81 |
|
JPMorgan China Growth & Income PLC |
79.2 |
|
Pershing Square Holdings Ltd |
74 |
|
Allianz Technology Trust PLC |
72.7 |
|
Fidelity China Special Situation PLC |
68.4 |
|
Edinburgh Worldwide Investment Trust PLC |
65.4 |
|
Biotech Growth Trust (The) PLC |
61.3 |
|
Worst performing |
|
|
St Peter Port Capital Ltd |
-42.9 |
|
Town Centre Securities PLC |
-45.9 |
|
Drum Income Plus REIT PLC |
-50.3 |
|
KCR Residential REIT PLC |
-51.5 |
|
Drumz PLC |
-53 |
|
NewRiver REIT PLC |
-57.4 |
|
Infrastructure India PLC |
-64.6 |
|
Capital & Regional PLC |
-70.4 |
|
JZ Capital Partners Ltd |
-73.1 |
|
Hammerson PLC |
-81.9 |
Source: Sharepad total return 31/12/2019 to 04/12/2020
Best and worst performing Investment Association fund sectors
“The tech sector has been flying high this year, as have markets in the US and the Far East. Unfortunately bringing up the rear are many of the UK sectors, with UK All Companies and UK Equity Income performance of particular note, as these are popular investments with retail investors. It’s been a rough few years for UK fund managers, many of whom will have faced challenges from big investors and fund outflows to better performing areas of the global market. Though they won’t be alone in hoping for a better 2021.”
|
Total return |
|
|
Best performing |
|
|
IA Technology & Telecommunications |
39.6 |
|
IA China/Greater China |
29.3 |
|
IA Asia Pacific Including Japan |
23.2 |
|
IA North American Smaller Companies |
18.6 |
|
IA Asia Pacific Excluding Japan |
17.2 |
|
Worst performing |
|
|
IA UK Direct Property |
-3.5 |
|
IA UK All Companies |
-7.0 |
|
IA Property |
-7.5 |
|
IA UK Equity & Bond Income |
-7.8 |
|
IA UK Equity Income |
-11.0 |
Source: FE total return 31/12/2019 to 04/12/2020
