Bonds and gilts funds up in March, US large cap funds down – Architas

Architas’ investment director Adrian Lowcock outlined best and worst performing funds and sectors in March 2018 in his latest note.

UK gilts and UK index linked gilts segments have been leading the rankings with respective average returns of 2.31% abd 2.22% with property completing the top three.

“2018 is clearly shaping up to be a significantly different year to 2017 as volatility continues to dominate markets. Investors have sought the safe havens of Government and corporate bonds in March as concerns over future global growth have risen significantly. Whilst the initial sell-off in January and February was driven by fears of interest rates rising faster than expected the current bout of volatility.

“This volatility is being driven by concerns over a US trade war with China, which could damage global growth, and increased focus on the future regulation of the technology sector. Each of these has the potential to drag on and dominate markets for the foreseeable future,” Lowcock said.

Leading Architas’ top ten funds in March was the Baillie Gifford Active Long Gilt Plus (5% return in March), followed by the Thesis TM Sanditon UK Select and the iShares Over 15 Years Gilts Index (UK) with performances of 4.28% and 4.12% respectively.

“Property also featured in the best performing sectors with the Aberdeen Property share fund the only member of the top 10 best performing funds which wasn’t a gilt or bond fund. Property has long been a diversifier from equities and offers some natural protection against volatile markets, particularly where the focus is on good quality tenants and a long term stable income stream,” added Architas’ investment director.

On the bottom side, North America (-5.57%), technology (-5.27%) and China (-4.4%) remained the worst performing sectors in March according to Architas.

Lowcock noted that US equity funds have much suffered last month as two issues remain : Donald Trump’s trade war with China and the increasing risks of tech giants, referring to the Cambridge Analytica case that unveiled a major Facebook data breach and Trump’s tweets about Amazon.

“Increased regulation looks likely, with the potential for some companies to be broken-up, which will impact on company growth prospects and profits. After such a strong performance of the tech giants and some pretty heady valuations a dose of reality has hit the share prices hard and could continue to weigh on the sector for some time.

“The funds suffering the worst performance in March had a growth and large cap bias with T Rowe Price’s US Large Cap Growth Equity and US Blue Chip fund each suffering falls of over 8%. Both funds have a bias towards technology with just under 40% exposed to the sector. The volatile performance of tech focused funds in March is a reminder to investors that high valuations can result in increased volatility and it is important to be diversified across different sectors and management styles,” observed Lowcock.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is deputy editor and French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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