Just in time for emerging markets week, China funds were some of the worst performing funds in what was an abysmal month for markets around the world.
Emerging markets have not had an outstanding year anyway, and as we covered earlier this week, we’ve seen a string of bad economic news stem from China in particular. This month, Brazil also made an appearance in the bottom 10 performing funds available for sale in the UK, despite sporting slightly better year-to-date results.
Less than 500 funds managed a positive return out of a selection of over 3,000 Morningstar Medalist-rated funds. No fund returned above 4%, and just about 120 funds did better than 1%. That said, the spread is not particularly wide, as only two funds saw negative returns in the double digits.
Climate change and clean energy also struggled in August, with a couple of funds with weaker returns than the worst performing China funds.
Among the best returners, energy funds were back again – at least in comparison to the rest of the fund market. The top 10 is rounded off with the addition of a variety of equity strategies.
Guinness Global Energy appears with both its UK and Irish versions, returning 3.95% and 3.23%. These two strategies were also the only two found in the top 10 with negative year-to-date performance. BGF World Energy was the third energy fund, and the biggest in the list at about £2.4 billion. It returned 3.44% in August.
The rest of the top performing list is a variety of strategies with no clear trend. Silver-rated Artemis US Smaller Companies was the best performer among these, with 3.23%. Its portfolio is heavily skewed towards industrials (accounting for 36% of the portfolio). The highest rated fund was Gold-rated GQG Partners US Equity (returning 2.77%) a strategy categorised as US large-cap blend equity. However, its holdings sit far into the growth spectrum according to our analysis.
China equities accounted for a significant part of the bottom 50 performing funds last month, and the worst performer among these was Gold-rated FSSA All China, down 9.12%.
Much of the negativity over China is due to the property sector and concern surrounding Country Garden, the largest private developer (which recorded losses of £5.3 billion for the first half of 2023). We have previously covered which funds hold exposure to the company.
Ben Yearsley, director at Shore Financial Planning, explains that the People’s Bank of China has started stimulating the economy with various rate cuts in anticipation of its impact.
“Market watchers are keeping a close eye on the Chinese property sector as if that implodes, markets both in the Far East and globally will be extremely messy,” he says.
The worst performer of all was last month’s top performer: Nikko AM ARK Disruptive Innovation, a European version of Cathy Wood’s famous ARK Innovation ETF (which had a torrid 2022). The fund is advised by ARK Investment Management. Overall, despite losing 11.58% in August, the fund is up 35.48% so far this year, and featured in the top 10 in our roundup of the best performers in the first half of the year.
The two climate-focused funds in the bottom were GMO Climate Change Investment, a thematic fund in the ecology category (down 10.88%) and Schroder Global Energy Transition, categorised as an alternative equity fund (down 9.39%).
