A year on from Pfizer Monday: how funds and trusts have performed

Rather than picking growth or value, it is more prudent to own a mix of both styles. 

A year ago, many commentators expected Pfizer’s vaccine to be a shot in the arm for value shares, which for more than a decade had notably underperformed growth companies.

At first, a market rotation did play out,  benefiting unloved value sectors such as oil, miners and banks. But since around mid-June onwards, the tide turned when initial vaccine bullishness disappeared.

Since then, concerns about rising levels of inflation have come to the fore, further unsettling investors. Greater caution among investors over the post-pandemic recovery led many back into growth shares, including the famous US tech giants. Growth companies are viewed as more resilient during periods of lower growth.

Global growth shares have now regained the upper hand. Over one year, from 9 November 2020 (‘Pfizer Monday’), the MSCI World Growth Index has returned 27.2% versus 26.4% for the MSCI World Value Index, according to figures from FE Analytics.  

• Growth shares versus value shares: the investment styles explained
• Even if rotation has legs, stick to this golden rule of investing 

Therefore, over the full year it was a favourable market backdrop for both growth-focused and value-oriented funds that invest globally. As we reported in March, rather than picking one style over the other, it is more prudent to own a mix of both styles over the long term and stick to one of the golden rules of investing; diversification, which helps to reduce risk.

Commodities and UK smaller company funds are top performers

Since Pfizer Monday, commodities have been the best-performing asset class. In particular, oil has benefited from a strong recovery in its spot price.

Investment banks Goldman Sachs and Saxo believe we are at the start of a commodities super-cycle – a multi-year bull market. Both banks argue that this will be driven by the global green revolution, as major economies strive to decarbonise. This will lead to increased use of ‘green’ metals, such as lithium and copper, to power car batteries and wind turbines.

The three best-performing funds since 9 November 2020 are the iShares Oil & Gas Exploration & Production ETF, Schroder ISF Global Energy and Guinness Global Energy, with respective returns of 112%, 109.7% and 90.4%.

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Outside commodities, UK smaller company funds have fared well. The average fund in the sector has returned 41.6% over the period, outperforming funds in the UK equity income and UK all companies sectors, which gained 27.8% and 27.6%.

Returns for all three UK funds since Pfizer Monday are ahead of other comparable regional fund sectors. This a reflection of the value rotation proving more of a tailwind for UK funds, given that value sectors – oil, gas, miners and banks – comprise a large part of the FTSE 100’s market cap.

How have UK value funds and trusts fared?

In the UK all companies sector, we have identified 10 funds that overtly have a value focus, due to having the words ‘value’ or ‘recovery’ in their names. There are, of course, other funds investing in value shares, but as they do not include ‘value’ or ‘recovery’ in their names, they are harder to spot. Some are dubbed ‘special situations’, but not all such funds have a value focus.

In total, eight of the 10 outperformed the sector average (27.6%) over the year, since 9 November 2020.

The five funds with ‘value’ in their name all outperformed the sector average. Premier Miton UK Value Opportunities led the pack, with returns of 40.4%, followed by Dimensional UK Value, JPM UK Equity Value, Polar Capital UK Value Opportunities and Man GLG Undervalued Assets, with returns of 39.6%, 37.6%, 35.4% and 31.5%.

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For funds with ‘recovery’ in their name, two of the five outperformed. Schroder Recovery was the best performer, with a return of 46.3%, followed by Slater Recovery and R&M UK Recovery, up 44.4% and 42.4%.

M&G Recovery and MI Brompton UK Recovery Unit Trust both underperformed the sector average, with returns of 27.3% and 25.4%.

Among investment trusts, value-focused Henderson Opportunities (LSE:HOT) and Fidelity Special Values (LSE:FSV) returned 54.5% and 52.8%.

In common with open-ended funds, some trusts that specialise in backing UK smaller companies fared even better, with returns of 96.1%, 82.1% and 62.7% for Chelverton UK Dividend Trust (LSE:SDV), Chelverton Growth Trust (LSE:CGW) and River and Mercantile UK Micro Cap (LSE:RMMC).

The links below are to our recent video interviews with George Ensor, fund manager of River & Mercantile UK Micro Cap. 

• Why small-caps can continue outperforming and latest buys
• Three undervalued small-caps and a standout pandemic winner 

Most-popular growth fund and trust

As mentioned above, for global equities over the full year there was little difference between growth and value share performance in terms of the two style indices. Therefore, there’s not been a big style headwind for global shares that many commentators had been forecasting.

The most-popular fund and investment trust among interactive investor customers both invest in growth shares. Over the one-year period, Scottish Mortgage (LSE:SMT) has returned 40.1%, while Fundsmith Equity is up 21.5%. The average global fund has gained 23.2%, while the average global trust is up 18.9%.

Terry Smith is a longstanding critic of the value style of investing. In August, he remarked that “no amount of recovery or low valuation will turn a poor business into a good one and quality is the main determinant of long-term performance”.