Tech funds enjoyed a strong recovery while bonds suffered, according to FE fundinfo fund performance data for May.
US trade policy once again dominated both narrative and markets in the month, with Donald Trump announcing 50% tariffs on the EU, before delaying their implementation.
Funds with significant US tech exposure were the biggest beneficiaries of market movements in the month. The Alger Focus Equity posted the highest returns of any single fund in the IA universe, returning 14.85%. This was followed by Morgan Stanley INVF US Growth, up 14.58%, and Polar Capital Global Technology, up 14.31%.
Unsurprisingly, this meant that the IA Technology & Technology Innovation was the top-returning sector – up 8.95%. UK and European smaller companies enjoyed strong months, up 7.25% and 6.34% respectively.
“May was a surprisingly good month with risk back in fashion seen most starkly in the performance of Nasdaq which gained 10% in May,” said Fairview Investing director Ben Yearsley.
“In fact, wherever you looked equity markets were in the ascendency. However, and it’s a very big however, the positivity all seems to hinge on Donald Trump’s mood especially around the EU and China.
“The FTSE gained a creditable 3.83%, however it was the German DAX that set new all-time high records after gaining 6% in May. On the currency front the pound had a good run after the US congress passed President Trump’s tax and spending bill or more accurately the “add to the credit card bill” Bill. Sterling gained almost 1% against US dollar and euro and 1.71% versus the yen.”
Meanwhile, bond markets suffered as investors reacted the Moody’s credit rating downgrade of US debt.
The UK Index Linked Gilts, USD Government Bonds and Global Government Bond sectors were all among the lowest returners in May.
However, healthcare funds were the worst performers overall.
“There doesn’t appear to be any specific reason for the malaise,” added Yearsley, “though Eli Lilly did report that their drug Zepbound was superior to Novo’s Wegovy. It was Healthcare funds dominating the bottom 10 in the IA universe last month with seven of the worst 10 performers all healthcare related from a mix of broad healthcare, biotech and life sciences.”
| Fund Sectors – 1 month (bottom five) | Return % |
| Healthcare | -3.83 |
| UK Index Linked Gilts | -2.84 |
| USD Government Bonds | -1.82 |
| UK Gilts | -1.28 |
| Global Government Bonds | -1.06 |