The reopening of economies and a resurgence in cross-border trade sent stock prices of energy companies rocketing last year.
The best performing actively-managed fund available to Hong Kong retail investors was the Schroder ISF Global Energy Fund, with a cumulative US-dollar return of 47.26%, according to FE Fundinfo. The fund has $416.4m in AUM and is managed by Mark Lacey.
Incepted in 2013, the it mainly invests in small- and mid-cap energy companies in the Americas (44.3%), followed by Europe ex-UK/Middle East (28.4%), and the United Kingdom (21.7%).
The fund has a large weighing in American natural gas company Coterra Energy (7.4%), supermajors Royal Dutch Shell (6.8%), and BP (5.4%).
The other energy fund which made it to the top of the list is the Blackrock GF World Energy Fund, which generated a 41.21% return in 2021.
In contrast to the Schroder product, the $2.35bn Blackrock fund invests almost 93% of its AUM in large-cap stocks. Over 50% of the fund’s assets are invested in US companies, followed by around 20% in Canada and 12.5% in the UK.
The next three best performing funds are all invested in Asian countries.
The Manulife Taiwan Equity Fund, which invests heavily in Taiwanese technology companies, ranked second on the list with a return of 46.43%, FE Fundinfo data shows.
The global supply shortage of semiconductors sent Taiwan stocks prices flying, with the local equity index gaining 23.7% in 2021.
The Manulife fund allocates 83% of its AUM to information technology stocks, including semiconductor manufacturers, Taiwan Semiconductor Manufacturing (TSMC) (7.8%), eMemory Technology (6.7%), circuit board manufacturer Unimicron Technology (6.6%), and Nan Ya Printed Circuit Board (6.6%).
The list of top five performing products are completed by JPMorgan’s India Smaller Companies Fund and its Vietnam Opportunities Fund, which invest in the other two best returning stock markets in Asia.
Managed by Rajendra Nair and Rukhshad Shroff, the $120.6m India fund invests over 70% of its assets in small- to medium-sized Indian companies.
Over 34% of the AUM is allocated to the industrial sector, including human resource company TeamLease Services (4.3%), supply chain management firm Mahindra Logistics (4.0%), and bearings manufacturer SKF India Limited (3.9%).
The Vietnam Opportunities fund, on the other hand, invests 32.5% in real estate, 21.7% in consumer staples and 16.7% in financials.
Although the Southeast Asian country was severely hit by the delta coronavirus variant in 2021, investors showed confidence in the long-term fundamentals and growth potential of Vietnam’s economy.
Top 5 performing equity funds in 2021
| Fund | Return | Volatility | Information Ratio |
| Schroder ISF Global Energy | 47.26% | 28.57% | 0.63 |
| Manulife Taiwan Equity TR | 46.43% | 26.61% | 1.42 |
| JPMorgan India Smaller Companies | 43.96% | 15.00% | 1.65 |
| Blackrock GF World Energy | 41.21% | 33.36% | 0.71 |
| JPMorgan Vietnam Opportunities | 39.75% | 18.15% | 1.83 |
In contrast, regulatory crackdowns, a zero-Covid policy, and power shortages hammered Chinese economic growth in 2021, and it is unsurprising that four out of the five worst performing equity funds last year are China-focussed.
The ICBC China Emerging Enterprises, E Fund Mgmt (HK) Greater China Leaders, Invesco PRC Equity, and the UBS (HK) China Opportunity Equity funds reported declines of between 27.3% and almost 40% over the past year.
According to the fund description, the ICBC fund is mostly invested in the technology, internet, and healthcare industries, which were at the epicentre of both regulatory crackdowns and Sino-US tensions.
“[Its] strategy leans toward smaller, more growth-oriented companies than its average peer and has a herd-like mentality, with exposure to high-momentum stocks,” Morningstar Direct said in its latest report on the fund.
“[The fund] also has an overweight bias to the volatility factor, meaning investing in stocks that have a higher historical standard deviation of returns, which contributes to a high-risk, high-reward approach.”
The other three Chinese funds also had significant exposure to technology stocks, such as Tencent, Alibaba, Meituan, JD.com, which were fined by the authorities for “violating the antitrust law” last year.
The HSBC GIF Brazil Equity Fund is the only non-China product sitting at the bottom of the list of performers.
Posting a -28.7% return in 2021, the $126.9m fund was most exposed to cyclical sectors such as financials (29.1%), materials (15.6%), and energy (12.6%).
The Brazilian stock market was one of the worst performing bourses last year, dragged down by a combination of sluggish economic growth, rising interest rates, higher rates, and fears that the country’s president might breach Brazil’s public spending cap.
Bottom 5 performing equity funds in 2021
| Fund | Performance | Volatility | Info Ratio |
| ICBC China Emerging Enterprises | -39.77% | 37.12% | -1.45 |
| E Fund Mgmt (HK) Greater China Leaders | -33.16% | 31.95% | -1.62 |
| HSBC GIF Brazil Equity | -28.70% | 28.40% | -1.24 |
| Invesco PRC Equity | -27.75% | 25.74% | -1.75 |
| UBS (HK) China Opportunity Equity (USD) | -27.26% | 24.34% | -1.75 |
Sectors
Both the top and bottom three performing equity sectors of the year are highly consistent with the individual fund results.
Boosted by semiconductor manufacturers’ stock performances, funds investing in Taiwan posted an average annualised return of 29.73% last year, according to FE Fundinfo.
The second-best performing fund sector of the year was India, with an average annualised return of 24.33%.
Despite being the second most infected country by the coronavirus, the Indian government injected ample liquidity into the market by maintaining low interest rates and announced an INR100trn ($1.3trn) infrastructure plan to recover from the pandemic.
These policies boosted the Indian stock market to reach an all-time high in October and the largest year-over-year increase in the benchmark SENSEX index in absolute terms historically.
At the macro level, India’s external vulnerability to a possible rise in global interest rates has been reduced significantly, while at the micro level there were improvements in corporate balance sheets.
Meanwhile, the easing of lockdown restrictions in some countries, coupled with oil and gas shortages led to a hike in energy prices , that supported a 24.28% average return for energy funds available to Hong Kong retail investors, according to FE Fundinfo data.
Top 3 performing equity fund sectors in 2021
| Sector | Return |
| Taiwan | 29.73% |
| India | 24.33% |
| Energy | 24.28% |
Driven by a steep drop in Brazilian equity prices and weakening local currencies, Latin America was the worst performing equity fund sector in 2021.
Brazil, the largest economy in the region, saw its local stock index close the year 12% lower, amid rising inflation and fears of fiscal overspending.
Pummelled by China’s regulatory crackdowns, China and Hong Kong stock markets suffered last year.
Most of the names affected by the regulatory clampdown, such as e-commerce platforms and tech giants, are listed on the Hong Kong stock exchange, which dragged the Hang Seng Index down 14.1% and the Hang Seng Technology Index down 34.8% — among the worst performing global indices.
Bottom 3 performing equity sectors in 2021
| Sector | Return |
| Latin America | -16.20% |
| Greater China | -12.12% |
| Hong Kong | -11.09% |
