The first month of the year was an eventful one for global markets. Equities took a significant hit, inflation soared, and the threat of war added a dramatic backdrop to a value/growth rotation. So which funds have made the most of it, and who struggled?
Morningstar Direct data shows how energy funds ruled the month. For one, the threat of a Russian invasion in Ukraine drove up oil prices. In fact, Morningstar strategist Allen Good recently told EMEA editorial manager Lukas Strobl that geopolitical risk combined with increasing demand could push crude towards $100. Western oil majors will naturally benefit.
Elsewhere, Latin America has done quite well. The Morningstar Emerging Markets Americas index has returned 7.92% so far this year, after an abysmal 2021 (down almost 10%). Brazil in particular has spearheaded the recovery as commodities performed strongly.
Joining the Latin American category with respectable returns is Japan, which see two funds in the top 10, but also one in the bottom 10.
Besides those two categories, almost nobody managed to grow. Fewer than 100 of the funds in our universe had a positive month. By contrast, the bottom 100 performers all had double-digit losses. The category that fell the hardest was US large-caps, which should not come as a surprise to anyone who’s kept even half an eye on the news.
By a country mile, the best fund in January was BGF World Energy, which was the only fund to reach double-digit growth (15.11%). That's almost double that achieved by second place fund abrdn Latin American Equities (8.18%), one of three LatAm funds in the top 10.
Some of the other funds that did well include those with a UK equity focus – after all, the FTSE did perform marginally better than other developed markets during the recent correction – and global emerging markets.
As mentioned, the number of funds with negative returns this month far outweighed those with a positive month. 681 of the 775 funds under our coverage saw losses in January.
Three of the 10 worst-performing funds last month were US large-caps, including Morgan Stanley’s US Growth and US Advantage, which both lost around 24%.
The category that featured the heaviest losses was global small- and mid-caps. Four funds are included in our list and two lost more than 20%: Baillie Gifford’s Global Discovery and Worldwide Discovery, both staples at the bottom over the past year. They were some of the biggest losers in 2021 overall too, losing more than 20% over the entire year.
Meanwhile, one Japan fund made it into the bottom list as well, showing how divergent returns can be even when focusing on one region. FFSA Japan Equity lost 18.04% in January.
Notably, several Europe categories were just shy of the bottom 10 list. European small- and mid-caps, as well as Europe ex-UK equity, account for the majority of the funds losing between 10-20%.
