Best and Worst Performing Funds in July.

H2O Allegro has yo-yoed back to the top of the performance table, while China and gold funds focused funds also fared well in July 

  • Annalisa Esposito
  • 5 min reading time
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The Negative-Rated H2O Allegro continues to yo-yo up and down the performance rankings. It's been a volatile year for the fund but it is the second-best performer among Morningstar Analyst Rated funds in July, with a return of more than 11% for the month. This performance was not, however, enough to reverse the heavy losses investors that have endured so far in 2020 - the fund is down a hefty 36.1% year to date. 

Top Performing Funds

Indeed, H20 Allegro was the worst performing open-ended fund in the first half of the year (down 42.5%), despite being the best performing fund in May. The fund was downgraded by Morningstar analysts a year ago after being put under review amid concerns about its exposure to illiquid, high-risk bonds linked to controversial German entrepreneur Lars Windhors.

Fund Morningstar  Analyst Rating Morningstar Category  July Return (%)
BGF World Gold Bronze Equity Precious Metals 12.0
H2O Allegro Negative Alt - Global Macro 11.1
BlackRock Gold and General Bronze Equity Precious Metals 10.4
Nordea 1 - Nordic Eq Smllr Cap Bronze Nordic Sm/Mid-Cap Eq 9.3
First State China Bronze China Equity - A Shares 6.9
JPM China A-Share Opps Silver China Equity - A Shares 6.1
Schroder ISF Greater China Silver Greater China Equity 6.1
GQG Partners Emerging Mkts Bronze Global Em Markets Equity 5.5
Schroder Em Asia B Acc USD Bronze Asia ex-Japan Equity 5.5
Robeco Chinese Equities Bronze China Equity 5.3

Source: Morningstar Direct, data as of July 31.

Our monthly run down of top and bottom performers looks at funds rated by Morningstar analysts with returns in sterling. The best performer in July is the Bronze-Rated BGF World Gold fund, which returned 12% during the month. And it’s the only fund in the Equity Precious Metal Mornignstar category to make it to the top performer's list; Bronze-Rated Blackrock Gold and General returned 10.4% in the month. 

Ben Yearsley, director at Shore Financial Planning, believes the excellent run of gold funds should come as no surprise: “Quantitative Easing has been on steroids in recent months, which could be inflationary at some point and may well have a debasing effect on currencies,” he explains. “Added to that is the lack of any yield on cash and government bonds and, for once, the opportunity cost of holding gold is nothing." The precious metal hit a record high in July and some experts have suggested it could reach a price of $2,500 before long.

Chinese funds also did very well for the second month in a row. First State China A Shares fund, JPMorgan China and Robeco Chinese Equities, all Bronze-Rated by Morningstar analysts, returned 6.9%, 6.1% and 5% respectively in July.

The reason of the upward trend in Chinese funds is "quite obvious", says Yearsley, with China benefitting from being "first in and first out" of Covid: “From an investment perspective, I think Asia is well placed; lower debt levels, attractive valuations, and a better Covid response generally make for a good combination for longer term investors.”

The main contributors to the First State China fund's strong performance were holdings in Chinese car manufacturer Great Wall Motor Co (02333) and Wanhua Chemical (600309), whose shares soared 56.4% and 37% respectively in the month. 

Worst Performing Funds

At the foot of the table, eight out of 10 worst performing funds in July are Japan-focused. Yearsley comments: “A double whammy of falling markets and rising sterling pushed both Japanese sectors to the bottom of the pile.”

Fund Morningstar  Analyst Rating Morningstar Category  July Return (%)
Man GLG Japan Core Alpha Bronze Japan Large-Cap Equity -12.6
Eastspring Inv Japan Dyn Silver Japan Large-Cap Equity -10.6
LF Morant Wright Japan Bronze Japan Flex-Cap Equity -10.5
Nomura Japan Strat Value Neutral Japan Large-Cap Equity -9.4
Lindsell Train Japanese Eq Silver Japan Flex-Cap Equity -8.7
Ninety One UK Special Sits Neutral UK Flex-Cap Equity -8.2
JH Japanese Smaller Cos Neutral Japan Sm/Mid-Cap Equity -8.1
Man GLG Japan CoreAlpha Bronze Japan Large-Cap Equity -8.1
AS Japanese Equity Neutral Japan Large-Cap Equity -7.4
Schroder Frontier Mkts Eq Neutral Global Frontier Mkts Eq -7.3

Source: Morningstar Direct, data as of July 31.

In particular, the worst performing fund is the Bronze-rated Man GLG Japan Core Alpha, which fell by 12.6% during the month. It is a whopping 22 percentage points behind the average return in its Morningstar category, Japan Large-Cap Equity, year to date. The main detractors to recent performance were camera maker Canon (7751) and world’s third largest steel producer Nippon Steel (5401), whose shares tumbled 24.6 and 18.7% respectively. 

In second and third position, the Silver-Rated Eastspring Investment Japan Dynamic and the Bronze-Rated LF Morant Wright Japan both tumbled by over 10.5%.

The only two funds in the table without a Japan tilt are Ninety One UK Special Situations and Schroder ISF Frontier Markets Equity – both rated Neutral by Morningstar analysts – and down 8.2% and 7.3% respectively. The UK is still out of favour and lagging other developed markets, as people worry about a second wave and the continuing Brexit negotiations. Meanwhile many areas of emerging markets are still facing rising cases of Covid, causing some concerns over the outlook for the region. 

 

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