IA China the worst performing sector in ‘damp squib’ August

Property sector woes impacting performance

Double exposure creative hologram of unfinished supertall building and Chinese flag. Describe China's real estate collapse, bubble, financial turmoil, and China's Lehman storm


China funds posted the poorest returns in a “damp squib” month for fund performance in August.

The IA China/Greater China sector was down 6.84% for the month, partly due to concerns over its huge property sector. Country Garden, the largest Chinese private property developer, posted losses of £5.3bn for the first half of 2023, while Evergrande filed for bankruptcy protection in the US.

Of the 50 IA sectors, only 10 provided positive returns over the month, with eight of those being bond sectors.

Fund Sectors – 1 month (bottom five)Return %
China/Greater China-6.84
Asia Pacific Ex Japan-4.43
Global Emerging Markets-3.73
Latin America-3.66
Asia Pacific inc Japan-3.6
Source: FE Fundinfo (figures to 31 August)

See also: Will China’s weakness derail global growth?

Fairview Investing director Ben Yearsley said that there was no clear trend over the month. Despite India topping performance with a return of 0.94%, no India funds were among the top 20 individual performers.

He said: “I’m not sure investors look too closely at their portfolios in August, which is a good thing as it wasn’t a great month. Bond funds doing well is not a surprise as we are near interest rate peaks and just the income yield alone on many funds is enough to drive decent returns.

“Despite the weather, August does seem to have flown by with not much happening. Market watchers are keeping a close eye on the Chinese property sector as if that implodes, markets both in the Far East and globally will be extremely messy.”

Fund Sectors – 1 month (top five)Return %
India/Indian Subcontinent+0.94
USD High Yield Bond+0.88
Global High Yield Bond+0.71
EUR High Yield Bond+0.53
USD Mixed Bond+0.51
Source: FE Fundinfo (figures to 31 August)

The £3.4m Oxeye Hedged Income was the top individual performer in August, up 5.97%.

The fund launched in 2016 and aims to produce absolute returns in all market environments, whilst adhering to robust risk management techniques.

Meanwhile, the $233m (£184.6m) Active Solar of the IA Global sector dropped 13.25% in August. The strategy invests at least two thirds of its portfolio in shares of companies primarily associated with the solar industry.

The fund is the top-performing strategy in the IA Global sector over the five years to 1 September, returning 157.9% over the period. However, it is a bottom-quartile performer over one and three years.

Funds – 1 month (top ten)Return %
Oxeye Hedged Income+5.97
AQR Systematic Total Return+4.43
AQR Style Premia+4.38
Argonaut Absolute Return+4.31
Abrdn Strategic Investment Allocation+4.04
Guinness Global Energy+3.95
Winton Diversified+3.88
Nordea 1 Alpha 15 MA+3.42
Schroder ISF Global Energy+3.37
Allspring Alternative Risk Premia+3.3
Source: FE Fundinfo (figures to 31 August)

See also: India poised to replace China as core emerging market allocation

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