Emerging market investors enjoyed a strong March as they filled three of the top four spots for fund performance, as ranked by the Investment Association.
The absolute top performer was the Jupiter India fund, which rose by 13 per cent, with Neptune India 11 per cent higher in the month.
The third best was First State All China fund, which gained 8.25 per cent in the month.
Emerging market assets tend to perform well when the dollar is relatively weak, as this keeps the borrowing costs of emerging market companies and countries down, leaving more cash to invest or return to shareholders.
At the start of March, the chair of the US Federal Reserve, Jerome Powell, said US interest rates may not rise this year, and this has boosted emerging markets as it weakened the dollar.
The MSCI Emerging Markets Index is up 6 per cent over the past three months, compared with 3 per cent for the MSCI All Country World Index in the same time period.
The remaining six funds among the top performers are index linked bond funds, those are bonds that move in line with interest rates and inflation.
Bertie Dannatt, investment director at Ruffer, an investment management firm, said index linked bonds are attractive in the current market conditions as they offer protection against inflation.
He said: "I think that with previous downturns, it was quite obvious where the risks were, but this time I think it could be a risk that people are not expecting, such as higher inflation.
"A lot of conventional bonds are trading at negative real yields, and if inflation picks up, then they don’t protect your capital, but inflation linked bonds do."
The various Ruffer portfolios have increased exposure to those bonds over the past year.
The Index Linked Gilt sector as a whole returned 5 per cent in March.
The worst performing funds were a pair of absolute return mandates, VT Garraway Absolute Equity, which lost 13 per cent, and Oxeye Hedged Income Option, which lost 12 per cent.
Ben Yearsley, director at Shore Financial Planning, said the poor performance of absolute return funds makes him wonder "what is the point' of the sector.
The best performing funds were:
Funds - March 2019 (top ten) | Return % |
Jupiter India | +13.32 |
Neptune India | +10.92 |
First State All China | +8.25 |
Blackrock Inst Bond Index Linked | +7.81 |
First State Indian Subcontinent All Cap | +7.42 |
Baillie Gifford Active INDEX Linked Gilt | +7.35 |
Aberdeen Sterling Index Linked Bond | +7.24 |
Scottish Widows UK Index Linked Gilt | +7.13 |
Scottish Widows UK Index Linked Tracker | +6.99 |
BMO UK Equity Linked Inflation | +6.93 |
david.thorpe@ft.com
