BMO GAM’s quarterly Multi-Manager Fund Watch survey revealed 32 of the 37 IA sectors lost ground in Q1 2018 and were down on the previous quarter on increased volatility.
Despite a strong long-term track record, the Jupiter India Fund was the worst performer in Q1. It has returned 110.2% over five years, but lost 15% over the last three months, according to FE.
Global and Income sectors, traditionally considered lower risk funds for stocks exposure, were the biggest losers, followed by the UK All Companies and North American sectors.
Despite being touted as a sector to hold when volatility strikes, Targeted Absolute Return failed to live up to its name in Q1 falling 0.8%. Portfolio Adviser reported in February that 80 out of the 101 funds in the Targeted Absolute Return sector lost money during the month’s market sell off. Over one year the sector has returned a paltry 1.2%.
BMO GAM revealed the IA Japanese Smaller Companies sector was the best performing sector gaining 1.5% in Q1. The Legg Mason IF Japan Equity fund was the fund that best outperformed the gains of its base market over the period. It gained 3.3% over the last three months. Over five years it has returned 222.7%.
Small-caps outperform
Looking over three consecutive annual periods, the UK Smaller Companies sector registered the highest number of funds delivering top quartile returns over each 12-month period, although was only achieved by 6.4% of the funds in the sector.
Only 19 (1.7%) of the 1,118 funds analysed across the 12 largest sectors achieving this feat.
Additionally, the UK Smaller Companies sector had the highest proportion of funds performing above median consistency at 17%.
Only 125 (11.2%) of the funds analysed achieved this, compared with 9% as at the end of Q4 2017.
Despite its above-average performance over a three-year period, the UK Smaller Companies sector still lost ground during the period and fell 3.1%. It was still the strongest performer of all UK equity sectors.
Kelly Prior (pictured), investment manager in BMO Global Asset Management’s Multi-Manager team, said: “The first quarter of 2018 bought with it some much anticipated volatility which saw most IA sectors down on the previous quarter.
“The UK Smaller Companies sector was the stand out performer of the quarter, securing the highest proportion of funds delivering consistent returns. It also weathered the dip in markets in February driven by a bout of volatility better than most of the other IA sectors.
“Whilst we have seen an uptick in funds delivering top quartile returns over three years, our survey shows still only a small proportion of funds are delivering over the long-term, falling short of the historic average.”
