Property and index-linked bonds topped the performance tables for both open- and closed-ended funds in July as investors sought shelter from rising inflation and pandemic woes.
The £52.59m Gravis UK Listed Property fund took the top spot, rising 8.19% over the month, while the NFU Mutual UK Property Shares and Aberdeen Standard UK Real Estate Share funds were also in the mix, returning 6.99% and 6.89%, respectively.
In the closed-ended space, the GCP Student Living topped the table, returning 31.37% during the month.
‘Still a demand for property assets’
“The top four sectors were all property last month – yes they can be more esoteric but so what? Property Securities sector came top with a rise of 6.31%, followed by Property UK Logistics, Property UK Residential and Property UK Healthcare,” said Fairview Investing investment consultant Ben Yearsley (pictured).
“It is fair to say that with the malaise of the open-ended physical property sector (well done FCA for still sitting in your hands on this one) there is still demand and need for property assets.”
Index-linked bond funds fare well
Also featuring in the top 10 open-ended funds were several index-linked bond funds – the best performing being the Axa Sterling Index Linked Bond, up 7.46% in July, securing fourth place in the table.
Others included the Janus Henderson Index Linked Bond, Fidelity UK Index Linked Bond and Insight UK Index Linked Bond.
“Inflation is the key economic concern and this month the Drewry World Container Index takes centre stage (in this update anyway),” Yearsley said. “The Drewry index essentially assesses the cost of transporting goods to and from US, Europe, and Asia. The index has shot up this year. In fact, the current index cost of $9,330 (£6,698) is 368% higher than this time last year and is well over four times the average cost of the last five years.”
China dominates worst performers
Funds focused on China dominated the worst performers during July, with the Invesco China Equity falling the most, returning -17.09%. Nine out of the 10 funds included in the bottom 10 table were China-focused, the exception being the Morgan Stanley Developing Opportunities fund which lost 14.54%.
“China was the big story from a markets perspective last month with Beijing unexpectedly cracking down on parts of the education sector; shares have taken a tumble. It remains to be seen whether this changes the long-term outlook for investing in China, or whether this is simply part of the expected political risk of investing there,” Yearsley said.
“Chinese equity markets were the worst performers in July with Hong Kong’s Hang Seng falling 9.58%; unsurprisingly MSCI Emerging Markets was down as well. The FTSE was fairly volatile in July, but overall it finished up 0.72%.”
The importance of diversity
According to Yearsley, the key takeaway from July’s performance tables is that diversity within portfolios is important.
“Not many would have guessed that property, inflation-linked and long-dated bonds would be the sectors to own. Many may well have written those asset classes off and certainly property has had many detractors over the last 18 months, but it does show again don’t bet the ranch on one idea, theme or type of investment,” he added.
