Investment funds in April: A decline in energy investments contrasts with a rise in property investments.
April was a tough month for energy funds, with the global slowdown causing oil prices to plummet. Five energy funds found themselves among the bottom 10 performing investment funds, with Guinness Global Energy taking the biggest hit, losing 13.5%. As the price of Brent plummeted, energy shares took a beating, according to Ben Yearsley, director of Fairview Investing.
US-focused funds had a rough ride too, with North American Smaller Companies and the main North America sector falling 5% and 4%, respectively. In contrast, Chinese funds were the worst performers overall, dropping an average of 7.5% due to Trump's tariffs.
On a positive note, property funds shone in April, making up four of the top ten funds. The fall in global growth expectations led markets to predict faster rate cuts by central banks, which benefited property funds. The European Central Bank already cut interest rates, and the Bank of England is expected to make a 0.25% cut next week.
"Europe's cut alongside the strength in German bunds would have been the key factors with three European property funds in the top ten," said Yearsley. Property securities trusts grew an average of 7.7%, followed by UK property trusts at 5%.
European bond funds also performed well, driven by the fall in German Bund yields, while Latin American funds benefited from a sharp decline in the US dollar. Those who sold out early in April might have seen losses, but most were recovered by the end of the month, except in the case of China.
As for US-focused funds, results were mixed. Morgan Stanley INVF US Growth surged 9.35%, while North American Smaller Companies fell 5%. In fixed income, Investment Grade corporates rebounded, and High Yield returned 1.29% late-April.
Property funds outperformed in the month, led by European real estate. Latin America and China also performed well, despite lacking specific return data. Credit spreads widened, favoring rigorous issuer selection. European yields rose relative to the US for the first time since mid-2024, impacting sectoral allocations.
Energy funds didn't have direct data, but a drop of 5.8% in commodities suggests pressure on energy-focused funds. Overall, those who held their ground may have seen losses in many asset classes, but most were recovered by the end of the month, except for China.
- The global slowdown in April affected not only energy funds but also caused oil prices to decrease significantly, leading to losses for Guinness Global Energy and other energy funds.
- While energy funds were struggling, property funds managed to outperform in April, making up four of the top ten performing funds due to falling growth expectations and predicted rate cuts by central banks.
- European property funds, in particular, were among the top performers in April, with an average growth of 7.7%, followed by UK property trusts at 5%.
- Latin American funds and Chinese funds also performed well, with Latin America benefiting from a sharp decline in the US dollar, and China potentially rebounding towards the end of the month, despite overall losses.
- Credit spreads widened in April, favoring rigorous issuer selection, and European yields rose relative to the US for the first time since mid-2024, impacting sectoral allocations.
- Commodities dropped by 5.8% in April, suggesting pressure on energy-focused funds, indicating that energy funds may have also faced losses, though specific data for Latin America and China was lacking.
