While fears of a second wave are still acute around the world, the outlook is slowly improving in the UK. In August, 84,000 restaurants registered for the “Eat out to help out” scheme that allowed customers to get 50% off their midweek meals.
With sentiment improving, our monthly list of top performing funds includes some UK names this time around, with a smaller companies fund topping the table. In a month that's traditionally quiet for the City, some of the best performers have delivered admirable returns.
Ben Yearsley, director at Shore Financial Planning, thinks the slow return to "normal life" in the UK is helping the outlook for British businesses. “The trick was to give people the confidence to return to a degree of normality," he says. "The Eat Out scheme helped one vital sector, and as workers trickly back to offices and maybe pop into a few shops on their lunch breaks, that helps another key sector in the UK economy.”
Best Performing Funds in August
The fortunes of UK firms was helped by a rise in the pound against the dollar in August, as well as the ongoing stimulus from the Government. We’ve looked at the best and worst performing funds with a Morningstar analyst rating, and the August top performers table is spread far and wide.
Most notable, perhaps, is the Bronze-Rated Merian UK Smaller Companies Focus, which led the way in the month with a return of 10%. The strong performance came even as the FTSE 100 dipped back below 6,000 in the month, weighed down by the oil majors and financial stocks. Yearsley says this may well have been a boon to smaller companies where "the diversity and dynamism at the smaller end of UK markets and the value on offer may finally be getting noticed".
| Fund | Analyst Rating | Morningstar Category | August Return (%) |
| Merian UK Smaller Cos Focus | Bronze | UK Small-Cap Equity | 10.0 |
| Man GLG Japan CoreAlpha | Bronze | Japan Large-Cap Equity | 9.9 |
| Eastspring Japan Dynamic | Neutral | Japan Large-Cap Equity | 9.6 |
| Merian UK Mid Cap | Bronze | UK Mid-Cap Equity | 9.5 |
| Stewart Indian Sustainability | Bronze | India Equity | 8.8 |
| Merian UK Smaller Companies | Silver | UK Small-Cap Equity | 8.6 |
| Natixis L. Sayles US Eq Ldrs | Silver | US Large-Cap Growth Eq | 8.2 |
| Harris Associates Global Equity | Neutral | Global Large-Cap Blend Eq | 8.0 |
| Loomis Sayles US Growth | Silver | US Large-Cap Growth Eq | 7.8 |
| Invesco Japanese Equity | Neutral | Japan Large-Cap Equity | 7.8 |
| JOHCM Asia ex-Japan | Bronze | Asia ex-Japan Equity | 7.8 |
However, despite a strong month, the fund is still in negative territory year to date, bleeding 9.21%. The main contributors to the fund’s performance in August were two-star rated online fashion retailer Asos (ASC) and software developer Blue Prism Group (PRSM), whose shares were up 46.2% and 36.4% respectively.
These were not the strongest areas on the UK market as a whole for the month, however, Yearsley points out. The travel and leisure sector, after a brutal year, gained 16.7% in the month. This could be another opportunity for value investors, he adds: “Is this a case of the dead cat bouncing from extremely low prices or are investors looking through the pandemic to see the long-term value on offer?"
While Japanese funds were the worst performers in July, they featured highly in the list of top performers for August. That's despite the fact that Prime Minister Shinzo Abe announced plans to step down later this year. Three Japanese funds featured among the top performers for August: Bronze-Rated Man GLG Japan CoreAlpha, Neutral-rated Eastspring Japan Dynamic and Neutral-rated Invesco Japanese Equity Advantage. This may not surprise considering the Japanese Topix was among the best performing markets in the month, rising 8.17% - the upward trend has not escaped the attention of veteran investor Warren Buffett, who has been investing in the region of late.
Meanwhile, two US growth funds also made the list, something else which will surprise few investors in a months which saw US tech giant Apple become the first publicly listed company to reach a valuation of $2 trillion. US and tech hit all-time high in the month, with Wall Street wrapping up the best August in more than 30 years since the 1980s. Natixis Loomis Sayles US Equity Leaders and Loomis Sayles US Growth Equity – both Silver-Rated by Morningstar analysts – returned 8.2% and 7.8% respectively in the month.
Worst Performing Funds in August
At the other end of the spectrum, four Latin American funds find themselves at the bottom of the performance tables. The region has struggled to contain coronavirus case numbers and this has had a devastating impact on the economies on countries in the reigon.
The Bronze-Rated ASI Latin American Equity and Neutral-Rated BGF Latin America occupy the first two positions in the worst performance table, tumbling by 7.9% and 7.6% respectively over August. They are down an eye-watering 33.1% and 34.6% year to date.
| Fund | Analyst Rating | Morningstar Category | August Return (%) |
| ASI Latin American Equity | Bronze | Latin America Equity | -7.9 |
| BGF Latin American | Neutral | Latin America Equity | -7.6 |
| AS SICAV Latin American Eq | Neutral | Latin America Equity | -7.2 |
| iShares Index Lnkd Gilt Index | Negative | GBP Inflation-Linked Bond | -5.6 |
| JPM Latin America Equity | Neutral | Latin America Equity | -5.4 |
| Royal London Index Linked | Bronze | GBP Inflation-Linked Bond | -5.3 |
| Schroder ISF Taiwanese Equity | Gold | Taiwan Large-Cap Equity | -5.2 |
| L&G AllStcks Idx-Lkd Gilt Indx | Neutral | GBP Inflation-Linked Bond | -5.1 |
| iShares UK Gilts AllStks Index | Bronze | GBP Government Bond | -3.6 |
| Royal London UK Govt Bond | Neutral | GBP Government Bond | -3.6 |
Among the main detractors to the performance of the ASI Latin American Equity are three-star rated Brasilian bank Bank Bradesco (BRD) and Brasilian stock exchange Brasil Bolsa Balcao (B3SA3), down 14.53% and 13.78% respectively.
Index-linked bond funds make up much of the remained of the list. Among the funds which stand out are Negative-Rated iShares Index Linked Gilt Index and Bronze-Rated Royal London Index Linked, down 5.6% and 5.3% respectively. Yearsley comments: “Is this a sign of buyers strike or just that the negative rates are too negative?”
