November was another month where the list of best and worst performing funds was very different from previous months.
Last month we said that volatility has completely turned the table around. With cases on the rise and a new variant of Covid-19, November followed in October’s footsteps, and Morningstar data shows the trend.
Topping the performance list we have two Schroder funds: ISF Taiwanese Equity, with a yield of 7.64%, and ISF China with 7.52%. However, it’s bond funds and US equities that round out the bulk of our Top 10 list. Bonds have struggled to add value in recent months, but as stocks have been hit the category has remained stable.
Best performing funds in November
Two global inflation-linked bond funds performed particularly well: PIMCO GIS Global Real Return (making 6.11%) and Schroder ISF Global Inflation-Linked Bond (making 6.08%). inflation bonds or US government bond funds too. But the category goes even further: a large chunk of all bond funds are in the top 200 performing funds for November. According to Shore Financial Planning, ten-year UK and US yields ended at 0.81% and 1.46% respectively.
Inflation is at the forefront of policy makers’ concerns, and as new restrictions loom to tackle the spread of the Omricron strain, there are real concerns that inflation could rise further. During his Senate testimony yesterday, Federal Reserve Chairman Jay Powell touched on inflation issues, admitting that the forecasting community had been overly optimistic.
Of this situation, Nikolaj Schmidt, economist at T. Rowe Price, states:
“The problem in the forecasting process has been linked to the difficulties in understanding a very unusual, pandemic-related bias on the supply side of the economy.”
He adds that we can expect volatility on the back of Powell’s position.
Technology is also one of the equity sectors that performed well again last month. The third best performing fund is Polar Capital Global Tech, rated Morningstar Silver, which has returned 6.11% this month and 16.20% so far this year.
Four US large-cap blended funds were also among the strongest of the month. They all brought in between 5.4% and 6%, but all also had annual returns of between 25% and 28%.
Worst performing funds in November
The weakest funds this month have been those focusing on Europe, and in particular Eastern Europe. JPM Russia and BNP Paribas Russia posted respective returns of -7.55% and -6.49% (although they are both up 17-19% this year), and two other emerging European funds recorded similar returns. Also on the list was UK equity income fund ASI UK Income, down 5.44%. However, the worst performer this month is Baillie Gifford’s Global Discovery, which is down 9.11%.
Shore’s chief investment officer, Ben Yearsley, speculates that falling yields in Russia and emerging Europe could be the result of the sharp drop in oil prices, but also heightened tension between Russia and the ‘Ukraine.
Overall, he says, markets have reacted in the expected manner in terms of Covid-19, punishing travel and consumption-related actions, “but the possibility of another full lockdown seems remote, from hence the reason the price cuts were limited to a few percent overall rather than the widespread double-digit declines of March 2020. “
He adds: âOn the positive side, companies are on the whole better capitalized and better prepared to deal with the unexpected now. The repurchase quality for many portfolios over the past month has reportedly been the decline of the pound, increasing the value of overseas investments.
âWhile I may not be thrilled with the outlook for bonds in general, last month they again proved their value in terms of diversification by rising while there were downfalls. Whether we have a Santa rally and a positive start to 2022 will largely depend on Omicron and whether the vaccines are effective. “