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Few equity funds above water in Q1

In Singapore and Hong Kong universes, 0.33% of equity funds delivered positive returns when markets collapsed.
Group of dolphins jumping from the sea (Atlantic Ocean, Madeira Island).

In the Singapore and Hong Kong fund universes together, there are 3277 equity funds. During the coronavirus pandemic-driven volatility of the first quarter, only 11 actively-managed products recorded positive returns.

Where were investors best positioned when the MSCI World and the S&P each plunged 23%?

It wasn’t ESG-themed products.

Excluding passive products, mutual funds that fared the best were absolute return and China- focused products (see charts below).

ESG underwater

Commentators have been praising the “outperformance” of ESG delivering better than non-ESG peers during the current market plunge. There’s little evidence of that in the data.

Among the 3000-odd equity funds in Hong Kong and Singapore combined, 190 are classified by FE Fundinfo in the ethical /sustainable category.

Only one of them was positive –– the MDO Thomas Llloyd Sustainable Infrastructure Fund. However, the fund is not representative of the equity category. Although the mandate allows it to invest in equities (hence the categorisation), it is 100% in senior secured bonds, according to the factsheet.

It is therefore safe to say not one ESG-focused equity fund was positive during the measured period.

Absolute return

Looking strictly at the Singapore universe, which covers both retail mutual and mutual funds (for accredited investors), there are 2,294 equity funds.

Of that total only 12 were positive during the wild market swings of the first quarter.

However, with passive funds excluded – the highest return funds were inverse ETFs which are designed to rise as the market falls – only eight actively-managed equity funds were above water. The list was dominated by absolute return strategies.

Amundi had two volatility themed (absolute return) funds ranking high, both run by lead manager Gilbert Keskin, based in Europe.

The firm’s Volatility World Fund was the best performer with a 25% return as markets fell by roughly the same percentage.

The factsheet states the fund’s aim is to “achieve a positive return in any type of market condition” yet it is difficult to see this as an equity fund. It does not appear to have any direct equity exposure.

About 27% of the portfolio is invested in options, another 26% in certificates of deposit and 12% in cash.

It also “makes extensive use of derivatives to reduce various risks, for efficient portfolio management and as a way to gain exposure (long or short) to various assets, markets or other investment opportunities”.

The firm’s other high performer, the volatility euro product, is similar in not taking direct equity exposure though not identical. 42% of the fund is invested in “negotiable European commercial paper”, a short-term debt instrument issued by companies to raise funds generally for a period of up to one year.

Matthews Asia

The one pure equity fund with a positive return (9.45%) in Singapore (and in Hong Kong) is the Matthews China Small Companies Fund.

Lead manager Tiffany Hsiao has run the fund since 2015. According to FE Fundinfo, which awards it five crowns, the fund has been in the top quartile for one-, three- and five year periods and is typically the top performer out of around 100 peer products in the China equity category.

According to the factsheet, 62% of the portfolio is invested in mainland small caps (under $3bn) with healthcare and infotech sectors together accounting for about 40% and representing strong overweights to the benchmark.

Stock picking likely has a strong influence on performance. The top ten holdings are relatively unknown names and the largest position at about 6% is Silergy, a semiconductor design firm based in Hangzhou.


Singapore — Equity funds with Q1 positive returns

  Return (in USD) Volatility
Amundi Volatility World F2 Cap 25.07% 36.65
Argonaut FP Argonaut Absolute Return I Acc 21.54% 22.52
Amundi Volatility Euro F2 Cap 14.64% 39.81
Matthews China Small Companies A Acc 9.45% 39.62
Open Door Capital Group China A 2.49% 26.84
MDO ThomasLloyd SICAV Sustainable Infrastructure Income R EUR 0.73% 0.50
BlackRock SF Americas Diversified Equity Absolute Return A2 GBP 0.21% 7.07
Worldwide Inv Opportunistic Equity A 0.14% 0.32

Source: FE Fundinfo. In US dollars, 01 January – 01 April 2020. Actively-managed equity funds in the Singapore retail and mutual (accredited) universe.


Key Indexes for comparison

Return (in USD) Volatility
CSI 300 -12.06% 29.82
S&P 500 -23.15% 49.86
MSCI World -23.98 49.21
FTSE Europe -27.18 53.78

Source: FE Fundinfo. In US dollars, 01 January – 01 April 2020.


Hong Kong

Hong Kong’s SFC-registered universe of equity funds totals 983. Of those, 13 products had positive returns.

Excluding passive products – inverse ETFs topped the charts on returns – only three actively-managed funds were above water.

Hong Kong — Equity funds with Q1 positive returns

Return (in USD) Volatility
Matthews China Small Companies A Acc 9.45% 39.62
Fullgoal China Mid-Cap Growth 7.69% 45.78
BOCIP China Healthcare 1.54% 44.77

Source: FE Fundinfo. In US dollars, 01 January – 01 April 2020. Actively-managed equity funds in Hong Kong’s SFC-registered universe.

Part of the Mark Allen Group.