With a return of 6.11% the IA Technology & Telecommunications was the best performing sector in October, just beating Japan which returned 5.98%, and Asia Pacific including Japan which rose 5.74% over the period 30 September to 31 October, according to FE Trustnet.
“While valuations are high in the sector, investors are still willing to pay for the huge growth potential offered by technology companies,” said Adrian Lowcock, investment director at Architas. “The sector has the second best earnings growth forecasts in the S&P, behind the recovering energy sector.”
Despite the strong month for tech however, the best performing fund in the peer group was a tracker, in the form of the Legal & General Technology Index Fund.
“Active managers may struggle to outperform the index as it is hard to justify owing some of the technology companies due to the high valuations and identifying the next winners in a rapidly evolving sector has always been a challenge,” said Lowcock.
The best performing fund overall in the month was the Matthews Asia ex Japan Dividend Fund, which finished October up 9.79%. Lowcock said Asia and emerging markets performed well, with China in focus as the Communist Party concluded its committee meeting of the leadership, or Plenum, which is held every five years.
All that glitters … isn’t gold
While bond sectors dominated the top 10 list of underperforming peer groups in October, it was gold and biotech funds that were the main losers in the month.
Four of the worst performing funds were gold invested, with MFM Junior Gold taking the unfortunate honour of being the worst after falling 6.5% over the period.
SF Peterhouse Smaller Companies Gold, HC Charteris Gold & Precious Metals and Smith & Williamson Global Gold & Resources completed the quarter, as Lowcock said the defensive asset class fell out of favour as investors became willing to take more risk.
Two biotech funds also found themselves in the worst 10 performers in October, with Candriam Equities Biotechnology down 4.53% and Pictet Biotech falling 4.42%.
“Biotech has suffered as M&A activity has waned and valuations have eased back,” he added. “Investors lost interest and have shifted their focus to other niche markets – artificial intelligence, robotics and niche technology funds.
