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Gilts show their defensive qualities as investors grow concerned over economic growth

Posted by Adrian Lowcock in Press releases category on 09 Sep 19


 Index-Linked funds take 7 out of 10 top spots in August
 Global Emerging Markets the worst performer
 Woodfords’ woes continue as it remains worst performing UK equity fund

Adrian Lowcock, Head of Personal Investing, Willis Owen says:

“The start of August coincided with a significant change in sentiment as investors became concerned over the strength of the global economy, and as fears of a recession rose. The US bond yield curve also inverted - meaning longer dated bonds had lower yields than shorter dated ones - which has historically been a leading indicator of recession, although by no means a guarantee.

“Investors have been struggling to keep on top of US-China trade relations and markets have been swayed by the news coming out of both countries.

“As such, gold remained in demand as it looks more attractive in a low interest rate environment, especially one where in the region of $17trn of bonds are now on negative yields. MFM Junior Gold was again the best performing gold fund for the second month in a row and the only one to feature in the top 10.

10 best performing sectors

Investment Association Sector  Percentage return   
UK Index Linked Gilts 7.6
UK Gilts 4.89
Sterling Corporate Bond 1.62
Property Other 1.54
Global Bonds 1.06
Sterling Strategic Bond 0.92
Sterling High Yield 0.42
Targeted Absolute Return 0.14
Mixed Investment 0-35% Shares 0.03
UK Direct Property -0.34
Source: FE Analytics, performance from 31st July to 31st August 2019 in pounds sterling on a total return basis

10 best performing funds 

Funds Percentage return   
Janus Henderson Index-Linked Bond 9.4
ASI Sterling Inflation-Linked Bond 9.11
Fidelity Institutional UK Index Linked Bond 9.01
iShares Index Linked Gilt Index (UK) 8.97
Baillie Gifford Active Index-Linked Gilt Investment 8.95
Insight UK Index Linked Bond 8.94
Janus Henderson Inst Long Dated Gilt 8.85
MFM Junior Gold in GB 8.81
Blackrock Institutional Bond Index Linked 8.75
ASI Sterling Long Dated Government Bond 8.66
Source: FE Analytics, performance from 31st July to 31st August 2019 in pounds sterling on a total return basis 

“Moving to the other end of the spectrum, Global Emerging Markets led equities lower in August as a surprise result in Argentina’s election sent the stock market plummeting, falling 48% (in US dollar terms) in one day. Smaller companies also took the brunt of the sell-off as investors sold out of riskier assets.

“UK equities featured in the worst performing sectors as the Brexit journey took another twist and continued to weigh on the UK. The top 10 worst performing sectors were dominated by Latin American focused funds following the impact of Argentina’s crash and a continued sell off in Brazil as the economy remains sluggish. Brown Advisory Latin American fund was the worst fund of the month, its 56% exposure to Brazil and 12% to Argentina weighing on performance.

“Woodford Equity Income is the first fund in the worst performing list not investing in Latin America. Things have gone from bad to worse for Woodford, with the fund suffering some stock specific issues as the embattled manager continues to restructure the portfolio.”

10 worst-performing sectors

Investment Association Sector  Percentage return   
Global Emerging Markets -5.07
North American Smaller Companies -4.15
Asia Pacific Excluding Japan -3.94
European Smaller Companies -3.66
UK Equity Income -3.46
UK All Companies -3.3
UK Smaller Companies -3.23
Technology & Telecommunications -3.2
Japanese Smaller Companies -2.98
China/Greater China -2.87
Source: FE Analytics, performance from 31st July to 31st August 2019 in pounds sterling on a total return basis

10 worst performing funds 

Funds Percentage return   
Brown Advisory Latin American -13.89
VT Garraway Absolute Equity -12.92
Neptune Latin America -12.14
HSBC GIF Brazil Equity -10.9
Invesco Latin American (UK) -10.55
Scottish Widows Latin American -10.33
LF Woodford Equity Income -10.32
Mirabaud UK Equity High Alpha -10.17
ASI Latin American Equity -10
BlackRock GF Latin American -9.96
Source: FE Analytics, performance from 31st July to 31st August 2019 in pounds sterling on a total return basis