The last few months have been a roller coaster for investors. Stock markets have fallen due to the stream of negative news, from war in Ukraine to rising inflation and interest rates. With data from Trustnet revealing that 90% of funds have delivered negative returns over the last three months, it’s hard to know where to invest your stocks and shares ISA.
But what about the funds that have managed to buck the trend? Let’s take a look at the sectors and funds that have succeeded in delivering positive returns in the last three months.
[top_pitch]
Which sectors have beaten the market downturn?
These sectors delivered the highest growth according to the latest figures from Trustnet:
Top 5 sectors (IA)
Total return (last 3 months)
Latin America
11.7%
UK Direct Property
3.4%
Commodity/Natural Resources
1.5%
Global EM Bonds (local currency)
1.2%
UK Equity Income
0.8%
Latin America was by far the highest-achieving sector, delivering growth of nearly 12%. What’s more, every fund in this sector delivered a positive return. Although, this comes after a disappointing sector performance in 2020 and 2021.
Similarly, every fund in the UK Direct Property sector has delivered a positive three-month return. Top of the pack was the Scottish Widows HIFML UK Property fund, with a return of 11%.
Of the remaining top five sectors, there were positive returns for around half of the Commodity and Natural Resources funds, over 90% of Global EM Bonds funds and 60% of UK Equity Income funds.
Which were the top-performing funds?
These were some of the highest-performing actively managed funds over the last three months, as reported by Trustnet:
Top 5 funds
Total return (last 3 months)
7IM Income Portfolio A
40.4%
7IM Absolute Return Portfolio A
40.4%
LF Brook Absolute Return Fund
19.0%
BNY Mellon Brazil Equity
17.1%
MFS Meridian Latin American Equity
16.5%
[middle_pitch]
1. 7IM Income Portfolio
Investors in this fund would have enjoyed a three-month return of over 40% and a 12-month return of 23%. And it’s been a consistent top-quartile performer against its peer group over the last five years too. It sits within the Mixed Investment 0-35% Shares sector, aiming to provide income and some long-term capital growth.
2. 7IM Absolute Return Portfolio
A second top-performer for 7IM, this fund aims to provide a positive capital return over a 12-month period, whatever the market conditions. It’s also delivered an impressive return of 40% in the last three months. But it’s only achieved a five-year return of 37%, mainly due to a 14% negative return in 2021.
3. LF Brook Absolute Return Fund
Another fund aiming to deliver positive 12-month capital growth, LF Brook Absolute Return Fund has delivered returns of 19% in the last three months. It’s also achieved a three-year return of nearly 74%, with a 29% return in 2020 alone.
4. BNY Mellon Brazil Equity
The BNY Mellon Brazil fund is at number four, with a three-month return of 17%. However, investors had a bumpy ride, suffering negative returns in 2020 and 2021.
5. MFS Meridian Latin American Equity
Also from the Latin American sector, this fund achieved a three-month return of over 16%. But it’s a volatile choice, with a positive return of 30% in 2019 followed by a loss of 17% in 2020.
What should you consider before investing?
Investors might see a recent fall in some fund prices as a buying opportunity for their stocks and shares ISAs. Or in a market downturn, it might signal the start of a period of underperformance relative to other sectors or funds.
Three of the top funds aimed to deliver modest capital growth whatever the market conditions. While they may not top the table in a bull market, they could be an attractive option in a market downturn.
The Latin American funds have delivered some strong returns. But due to the volatility of emerging markets funds, it’s been a roller coaster.
Our Foolish philosophy is to invest over the long term, which smooths out the upturns and downturns of stock markets. Investing across different sectors may also help to spread the risk of one fund or sector underperforming.
How can you invest using a Stocks and Shares ISA?
We’ve written a guide to stocks and shares ISAs that covers what you need to know about investing.
It’s worth taking the time to check the fees charged as they can add up to a substantial amount over time. If I invested £50,000 in an ISA which grew by 8% annually for 25 years, I’d pay an additional £9,000 in fees for an ISA with a 0.5% fee, compared to a 0.25% fee.
We’ve also produced a list of our top-rated providers of stocks and shares ISAs, based on our experts’ research of the market.
The post Revealed: the sectors and funds beating the market downturn for stocks and shares ISA investors! appeared first on The Motley Fool UK.
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