Revealed: how the best and worst funds of 2021 have fared so far this year

Sam Benstead crunches the numbers and finds that 10 of the 20 best performers of 2021 are also in the top 20 so far this year. 

The top-performing funds last year have continued their winning streak, with 10 of the 20 best performers of 2021 also in the top 20 so far this year as well.

They are all energy and mining funds, which continue to be boosted by high oil prices. Last year the Covid-19 vaccines sparked economic growth and began to fuel commodity price inflation after resource prices plummeted during the early stages of the pandemic.

This year, the trend has continued, with the added impact of the war in Ukraine disrupting oil and food markets.

The best funds over 2021 and 2022 include iShares Oil & Gas Exploration & Production UCITS ETF (71% last year and 29% return this year), iShares S&P 500 Energy Sector UCITS ETF (55% last year versus 44% this year), and SSGA SPDR S&P U.S. Energy Select Sector UCITS ETF (54% last year and 43% this year)

In 2021, around half of the top funds were natural resources related, while others invested in India, property and private stocks.

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This year, absolute return funds claim pride of place among natural resource funds as the top strategies. Such funds, which employ hedge fund techniques, including the ability to “short” companies to profit when they fall, have been very successful this year, as have those that trade algorithmically.

They include 7IM Absolute Return Portfolio (42% return in 2022), 7IM Income Portfolio (35%), AQR Managed Futures (30%), and AQR Systematic Total Return (41.5%).

With markets falling sharply this year, profiting from falling stock prices – particularly unprofitable tech companies that were in a bubble in 2020 – has been good business for absolute return funds.  

FE FundInfo, data to 13 July 2022

Did last year’s worst funds bounce back?

It might be reasonable to expect last year’s worst funds to rebound this year due to lower prices and overzealous selling. But performance has gone from bad to worse for many strategies.

Tech-focused funds have suffered the most over the past two years as interest rates have increased to attempt to bring down inflation.

Last year’s worst fund, HAN EMQQ Emerging Markets Internet & Ecommerce UCITS ETF, has fallen 18% this year after it delivered a 32% loss last year.

Other big losers over both years include Baillie Gifford Global Discovery (-20% in 2021 and -32% so far this year), Nikko AM ARK Disruptive Innovation (24% loss last year and 46% loss this year), and First Trust Dow Jones International Internet UCITS ETF (down 24% last year and 27% this year).

Of the 20 worst funds last year, returning -24% on average, just five have delivered a positive return this year and the average return is –11.5%.

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There was one big recovery story: emerging markets. HSBC GIF Brazil Equity lost 28% in 2021 but has gained 7% this year and JPM Brazil Equity went from -25% to 4.5% returns.

Investors extrapolated higher resource prices with greater profits for Brazil’s biggest stocks, which tend to be mining and oil companies.

Funds investing in Turkey also rebounded, with HSBC MSCI Turkey losing 28% last year but gaining 7% so far this year. iShares MSCI Turkey UCITS ETF delivered similar returns.

FE FundInfo, data to 13 July 2022

Who are the worst performers overall this year?

This year, the bottom funds overall are clustered around different technology sectors, as well as those that own Russian stocks.

Rock bottom is HAN ETC Group Digital Assets & Blockchain Equity UCITS ETF (64% loss), followed by Liontrust Russia (58% loss) and HAN Global Online Retail UCITS ETF (58% loss).

Other tech-centric funds struggling include Baillie Gifford American (-45%), Morgan Stanley US Advantage (-45%) and T. Rowe Price Global Technology Equity (-42%).

Will these struggling funds make a comeback? Russia funds are still gated due to difficulty trading Russian stocks due to the war and could be out of action for some time, but there may be more hope for technology funds – so long as inflation comes down.

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Low and controlled inflation would allow central banks to cut interest rates, which would provide much-needed fuel for companies whose valuations are based on earnings expected way out in the future.

But currently inflation just keeps rising, with a 9.1% year-over-year inflation rate recorded in June in the United States last week and similar numbers in Britain.

Commodity funds, some of the best performers this year and last, are unlikely to maintain their top spot next year.

Recession fears are stalking markets due to the inflation rate and rising interest rates, which has prompted traders to sell raw materials. A basket of commodities put together by data firm Bloomberg has dropped around 20% from highs in June. 

FE FundInfo, data to 13 July 2022