2022 has been a difficult time for global stock markets. And by extension it’s been challenging for investment funds to generate any sort of positive return.
According to Nick Wood, head of research at Quilter Cheviot, only a tiny number number of funds delivered a positive return between January and June.
The first half of 2022 has been a torrid time for most investors, with both equities and bonds seeing significant declines. It was no different in the world of investment funds, where only 6% of all funds in the Investment Association funds universe managed to register a positive return in sterling terms in the first half of the year.
Soaring investment funds
Investment funds that focus on energy were (perhaps unsurprisingly) amongst the best-performing in the first half of 2022. According to Wood, funds with exposure to energy stocks “filled the top five positions and eight of the top 10”.
|Top 10 best-performing investment funds||Total returns (%) in GBP|
|BGF World Energy D2||39.47|
|Schroder ISF Global Energy Z Acc EUR||34.64|
|GS NA Engy & Engy Infras Eq R Acc USD||34.37|
|TB Guinness Global Energy I Acc||31.06|
|Vontobel Commodity I USD||30.72|
|Multicooperation GAM Commodity USD C||30.47|
|Guinness Global Energy Y GBP Acc||28.05|
|AQR Systematic Total Return UCITS C1||27.95|
|AQR Mgd Futures UCITS F GBP||27.89|
|LO Funds Cmdty Risk Premia USD NA||25.57|
The best-performing fund was BGF World Energy fund. The top three holdings in this particular vehicle are global fossil fuel goliaths Shell, Exxon Mobil, and Chevron.
Energy-focused stocks have benefitted from soaring oil and gas prices following Russia’s invasion of Ukraine. Brent crude for example hit its most expensive for 14 years earlier in 2022, just below $140 per barrel.
Meanwhile, funds with significant exposure to Russia and Eastern Europe, like Liontrust Russia, were amongst the worst-performing in the six months to June.
They sunk as investors digested the economic implications of the war in Ukraine — including the placement of heavy sanctions on Russia — on the region.
|Top 10 worst-performing investment funds||Total returns (%) in GBP|
|Liontrust Russia C Acc GBP||-53.08|
|MS INVF US Growth Z||-52.51|
|Nikko AM ARK Disruptive Innovation D GBP||-52.08|
|MS INVF US Advantage I||-49.44|
|Baillie Gifford American B Acc||-49.10|
|Morgan Stanley Global Insight I GBP Acc||-48.93|
|Fidelity Emerg Eur Mid East&Africa W Acc||-48.72|
|Morgan Stanley US Advantage I Acc GBP||-47.79|
|T. Rowe Price Glb Tech Eq Qd GBP||-46.84|
|T. Rowe Price Glb Tech Eq CAccGBP||-45.43|
Quiler Cheviot notes too that “the other eight funds are dominated by those firms heavily biased towards higher growth stocks”.
These include Cathy Wood investment vehicle Nikko AM ARK Disruptive Innovation. Top holdings here include electric vehicle manufacturer Tesla and video conferencing specialist Zoom.
Reasons to be cheerful
These are difficult times for UK share investors and owners of investment funds. And more trouble could be around the corner as the macroeconomic situation worsens.
Inflation is tipped to keep rising as the war in Ukraine pushes up energy and food prices. Central banks look set to continue aggressively hiking interest rates in response in a further blow to global growth.
However, as a long-term investor myself I believe buying equities and certain funds remains a good idea. I myself have recently invested in The Renewables Infrastructure Group in recent months. This is because I believe it will deliver exceptional returns over the long haul as demand for renewable energy steadily grows.
I plan to continue shopping for top stocks and funds to buy despite the uncertain near-term outlook. History shows that the prices of riskier assets like these always bounce back strongly following economic crises. I think the same thing will happen this time around.