The best and worst-performing funds of 2020

We reveal the top 10 fund winners of 2020 and consider whether the worst performers will bounce back next year.

At the end of a turbulent year, we have crunched the numbers to see which funds performed best for investors, and which ones disappointed.

As coronavirus dominated our daily lives, the fund winners in 2020 were those that backed companies that benefited from the shift to working from home, most notably technology firms and businesses with strong online operations.

This is reflected in the top 10 performing funds. Growth-focused asset manager Baillie Gifford had a great year, with five of its funds in the top 10. Baillie Gifford American topped the chart with an impressive 119% return, followed by Morgan Stanley US Growth, up 116%. In total, nine out of the top 10 funds have US growth or tech-focused mandates.

Top 10 funds of 2020

Source: FE Analytics. Data from 1 January 2020 to 9 December 2020. Note: we have only included funds that are available for self-directed retail investors to purchase. 

It looks like a case of ‘a rising tide lifts all ships’ rather than individual fund manager skill and stockpicking being responsible for all the outperformance, suggests Rory Maguire, managing director for UK at Fundhouse.

Looking ahead to 2021

Will next year’s winners’ list look the same? Even Baillie Gifford has conceded that the likes of Tesla (NASDAQ:TSLA) and Amazon (NASDAQ:AMZN) are slowing down, says Maguire, so they may not be what powers fund performance in 2021. He adds: “Our instinct would be that if you avoid those investments that are seemingly overpriced and buy those that are undervalued - you’re probably going to do better in the long run.”

The one outlier in the top funds list is MFM Junior Gold, following a good year for gold.

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Funds that struggled

Two energy funds - Guinness Global Energy and Schroder ISF Global Energy – were 2020’s worst performers, with falls of more than 30% each. This reflects a challenging year in which the oil price slumped. Ben Yearsley, director at Shore Financial Planning, says: “The oil price went from $70 to $20 - ignoring the briefly negative oil price which was technical – so it has had a dreadful year. Oil companies are battling with that alongside climate change, so it is no surprise seeing an oil fund among the worst performers.”

UK equity funds were also among the worst performers of 2020 following a tough year for UK stocks.

But UK funds are unlikely to be in the doldrums again next year, predicts Yearsley, who is optimistic about their prospects once the cloud of Covid-19 and Brexit uncertainty lifts. “I think the UK is set for a good year next year,” he says. “It is cheap, and the problems it has faced are becoming less important so you won’t see the same next year. I thought the UK looked decent value coming into 2020, although Covid-19 interrupted things.”

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Maguire adds that UK equity fund managers have really struggled this year, with some big-name managers, including Mark Barnett, stepping down from their funds.

“You’ve seen an extraordinary amount of UK fund managers lose their mandates, or even have a temporary or permanent end to their careers,” he notes. But Maguire also sees the UK market starting to look more enticing now. “In a world where everything looks quite pricey, the UK looks very reasonably priced and unloved, and that looks like an opportunity. It is a good place for long-term investors at the moment.”

The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this data may not be suitable for all investors and, if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website.