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Volatility ramps up among top UK funds

Even the top five performing UK equity funds in Asia have lower performance and higher volatility than last year as the Brexit vote nears.

“The equity markets, both in the UK and across the globe have seen more volatility ahead of the Brexit referendum. It is really difficult to predict the outcome,” Luke Ng, FE Advisory’s senior vice president of research, told FSA.

Ng said if Brexit happens, equity markets will see some pressure in the near term and capital may flow into safehaven assets such as gold.

Returns and volatility

Asia’s top five UK equity funds, including ETFs, year-to-date:

  • Aberdeen Global UK Equity Fund
  • SJP UK and General Progressive Fund
  • SJP UK Growth Fund
  • Threadneedle (Lux) UK Equities Fund
  • Threadneedle-UK Overseas Earnings Fund

Year-to-date, the five funds have been generating returns of 0.87% to 3.22%, outperforming the UK equity fund sector in Hong Kong, which returned -0.91% (see chart below). 

But during the same period last year the fund and sector returns were considerably higher. The same funds returned 4.9% to 7.5%, versus the sector’s 6.85%.


Performance of top five UK funds available for sale in Asia year to date, according to FE Analytics


 Performance of these funds in the same period a year ago, according to FE


In addition, the volatility of the top five has increased:


Fund  Year-to-date  Same period 2015 
Aberdeen  15.82 12.88
SJP UK and General Progressive  13.57 10.90
SJP UK Growth 18.09 11.26
Threadneedle (Lux)  14.80 12.70
Threadneedle UK Ovrs  14.67 12.53

Source: FE Analytics 


EU payback? 

Adrien Pichoud, chief economist at SYZ Asset Management, believes a Brexit could result in retribution from the European Union, which would roil markets.

“A vote to leave the EU will herald a period of increased uncertainty and volatility, not only the UK but for the EU and its future.

“A leave vote would potentially trigger a shock wave in the EU and the eurozone as a Pandora’s box is opened and every election becomes a potential test on EU membership, with possible referendums held in other countries,” he said.

If the UK exits, it woud likely experience a recession in the second half of 2016 due to a slowdown in investment and consumption, possibly reinforced by an initial tough stance from the EU in order to make the “exit” experience look unattractive to other countries, Pichoud said. 

Part of the Mark Allen Group.