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November's Best- And Worst-Performing Funds

Bond and US equity funds bounce while European equities drop as Omicron makes its presence known across markets

Sunniva Kolostyak 1 December, 2021 | 3:36PM
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November was another month where the list of best and worst performing funds looked dramatically different from previous months.

Last month, we stated that volatility completely flipped the table. With soaring cases and a new Covid-19 variant, November followed in the footsteps of October, and Morningstar data shows the trend.

At the top of the performance list we have two Schroder funds: ISF Taiwanese Equity, with a 7.64% return, and ISF China with 7.52%. However, it is bond funds and US equity that complete most of our top 10 list. Bonds have struggled to add value in the past months but as equities took a hit, the category remained stable.

Best Performing Funds in November

Two global inflation-linked bond funds performed particularly well: PIMCO GIS Global Real Return (returning 6.11%) and Schroder ISF Global Inflation-Linked Bond (returning 6.08%). Several of the funds that just missed out on our top 10 are either UK inflation bonds or US government bonds funds too. But the category goes beyond that too: a large part of all bond funds feature in the top 200 performing funds of November. According to Shore Financial Planning, the UK and US ten year yields finished at 0.81% and 1.46% respectively.

Inflation is at the forefront of policy makers' minds, and, as further restrictions loom to fight the spread of the Omricron strain, there are real concerns inflation could rise further still. During his Senate testimony yesterday, Federal Reserve Chair Jay Powell addressed inflation concerns, admitting that the forecasting community had been too optimistic.

Of this situation, Nikolaj Schmidt, economist at T. Rowe Price, says:

“The problem in the forecasting process has been related to the difficulties in understanding a very unusual, pandemic-related, distortion to the supply side of the economy.”

He adds that we can expect volatility on the back of Powell’s stance.

Four US large-cap blend funds were among the month’s strongest as well. They all returned between 5.4-6%, but have all also had annual returns between 25-28%.

Worst Performing Funds in November

The weakest funds this month were the ones with a European--and particularly eastern European--focus. JPM Russia and BNP Paribas Russia have returned -7.55% and -6.49% respectively (although both are up 17-19% this year), and two more emerging Europe funds had similar returns. UK equity income fund ASI UK Income also made the list, being down 5.44%. However, the bottom performer this month is Baillie Gifford's Global Discovery, which is down 9.11%.

Shore's investment director Ben Yearsley speculates that the lower returns from Russia and emerging Europe could be the result of the sharp oil price fall, but also increased tension between Russia and Ukraine.

Overall, he says markets have reacted in the manner expected in terms of Covid-19, punishing travel and consumer related stocks, “but the chance of another full lockdown appears remote, hence why price falls have been limited to a few percent overall rather than the widespread double-digit declines of March 2020."

He adds: "On the positive side, companies are on the whole better capitalised and better prepared to cope with the unexpected now. The redeeming quality for many portfolios last month would have been the fall in sterling, boosting the value of overseas investments.

"Whilst I can’t get excited about the outlook for bonds generally, yet again last month they proved their worth in diversification terms rising whilst all about there were falls. Whether we have a Santa rally and a positive start to 2022 will largely depend on Omicron and whether vaccines are effective."

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Sunniva Kolostyak

Sunniva Kolostyak  is data journalist for Morningstar.co.uk

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