The best and worst places to have invested in 2020

It's likely been an awful year if you've focused your investing on the UK.

It’s been a difficult year for investors of all kinds so far. There are few areas of our lives that have been untouched by the chaos wrought by Coronavirus, and the investment markets are certainly no exception.

Indeed, the early days of the virus saw dramatic crashes in stock markets, not just in the UK but across the globe, as it became clear that no country was safe.

However, not all markets and sectors have been impacted in the same way. While some sectors and funds have seen particularly disastrous results, others have performed far better, even delivering strong returns to investors who have held their nerve.

So let’s take a look at the best and worst areas to have invested in 2020 thus far.

The best and worst sectors to invest in

New analysis of the best and worst-performing sectors in the first half of the year make for painful reading for investors who have focused their cash on UK markets.

The study by investment experts Willis Owen found that the UK takes the top four spots in its list of the ten worst performing sectors of 2020 so far, with UK Equity Income worst of all.

Investors in this sector have seen returns of -20.19%, a dreadful performance in no small part down to the action taken on the dividends by British firms.

Adrian Lowcock, head of personal investing at Willis Owen, pointed out that firms rushed to cut dividends at an unprecedented rate, with some necessary, some prudent, and some simply forced upon companies.

Lowcock added: “Many dividend-paying companies have lagged in the rally as they sat in areas of the markets not set to benefit from any short-term changes in people’s behaviour – such as energy, financials and insurance.

Whilst we expect more to come, the worst is probably over, as British companies acted fast to cut dividends.”

It’s not just the dividends that have dented returns from UK sectors though, with the relative weakness of sterling improving the performance of international equities. 

Here are the 10 worst-performing sectors according to Willis Owen.

Investment Association Sector

Percentage return (%)

UK Equity Income

-20.19

UK All Companies

-17.68

UK Smaller Companies

-16.59

UK Equity & Bond Income

-14.26

Property Other

-11.45

Global Equity Income

-6.25

Sterling High Yield

-5.2

Global Emerging Markets

-5.14

Mixed Investment 40-85% Shares

-4.29

Mixed Investment 20-60% Shares

-4.06

Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis

However, at the other end of the scale, technology and telecoms firms have seen huge boosts to their stock prices ‒ and in turn big returns for their investors.

This makes sense, given the fact we are all turning to digital services in greater numbers, whether to continue working or simply to keep in touch with friends and family.

Chinese stocks have also performed strongly, perhaps surprisingly given Coronavirus started there.

Though as Lowcock points out, China was the first country to go into ‒ and then come out of ‒ a lockdown, and its strong technology exposure has boosted its results.

Here is how the top 10 sectors shape up:

Investment Association Sector

Percentage return (%)

Technology & Telecommunications

20.07

UK Index Linked Gilts

13.69

China/Greater China

12.97

UK Gilts

10.14

Global Bonds

6.21

Asia Pacific Including Japan

5.36

North America

3.05

Sterling Corporate Bond

2.73

Global EM Bonds Hard Currency

2.41

Global EM Bonds Blended

2.03

Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis

The best and worst funds

It’s one thing to look at overall sectors of course, but returns will inevitably vary based on precisely how we are investing.

Two funds that are focused on UK equities could have vastly different returns as a result of the decisions made by the fund manager, for example.

Looking at the top performers according to Willis Owen’s study, the Morgan Stanley US Growth fund leads the way, in large part due to its combination of healthcare and technology stocks. 

That same combination ‒ as well as the overall recovery seen in China ‒ has helped the Matthew China Small Companies fund to its similarly strong performance.

Here’s the top 10 best-performing funds of 2020 thus far.

Funds

Percentage return (%)

Morg Stnly US Growth in GB

64.17

Matthews China Small Companies in GB

63.23

LF Ruffer Gold in GB

55.97

Baillie Gifford American TR in GB**

54.06

LF Access Long Term Global Growth Investment TR in GB

47.79

Baillie Gifford Long Term Global Growth Investment in GB

47

Morg Stnly US Advantage in GB

41.56

Morgan Stanley US Advantage in GB

37.98

New Capital US Future Leaders in GB

37.3

MFM Junior Gold in GB

36.41

 

Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis

Looking at the worst-performing funds, its perhaps not surprising that Latin America has performed so poorly.

It’s a region of the world that is currently feeling the heat most from Coronavirus, coupled with a dreadful response from certain governments there.

Energy funds have also struggled badly, in no small part due to the oil prices tumbling due to a collapse in demand and an oil price war.

Finally, it’s worth noting that the LF Equity Income fund is right there in second spot.

Thankfully this Woodford fund is now being would up, with investors being repaid what’s left of their money.

Funds

Percentage return (%)

ASI UK Recovery Equity in GB

-42.48

LF Equity Income TR in GB

-42.4

Schroder ISF Global Energy TR in GB

-39.74

HSBC GIF Brazil Equity in GB

-38.53

Oxeye Capital Management Limited The VT Oxeye Hedged Income Option in GB

-37.65

TB Guinness Global Energy in GB

-36.7

Guinness Global Energy in GB

-36.41

MFS Meridian Latin American Equity in GB

-34.69

Aberforth UK Small Companies in GB

-34.2

Invesco Latin American (UK) in GB

-33.69

 

Source: FE Analytics, performance from 31st December 2019 to 30th June 2020 in pounds sterling on a total return basis

 

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