Latin American funds propped up the performance tables in August, as the covid-19 response of Brazil and Mexico combined with a heavy reliance on commodities and natural resources weighed on the region.
Markets continued to trend upwards during the month, particularly in the US led by the highly prized technology stocks, with the Japanese and UK smaller companies sectors leading the way from a funds perspective.
However, funds investing into Latin American or Brazilian equities filled the six worst-performing spots, and seven of the bottom ten performers, according to FE fundinfo data.
On most measures, Brazil has had a poor covid-19 response, as has Mexico."
Latin American funds from Scottish Widows, Liontrust, Invesco, Aberdeen Standard Investments, and BlackRock lost 8.4%, 8.3%, 8%, 7.8% and 7.6% respectively, with HSBC and J.P. Morgan's Brazilian offerings declining by 8.2% and 7.1% respectively.
"On most measures, Brazil has had a poor covid-19 response, as has Mexico," said Ben Yearsley, director at Fairview Investing.
"Add in the reliance on natural resources and commodities and you have a toxic combination, though a weakening dollar could be slightly better news, as it normally is for emerging markets."
Despite the widespread losses from this region, it was UK government bonds that fared worst on a sector basis, with funds in the Investment Association's UK Index-Linked Bond and UK Gilts sectors seeing average losses of 5.4% and 3.8% respectively.
Head of personal investing at Willis Owen Adrian Lowcock said August had been "a poor month for defensive assets", noting Gilts' rebounding from record low levels as concerns of an escalation of trade tensions between the US and China began to ease.
"This, combined with renewed optimism of a stronger recovery because of better than expected US consumer spending data, as well as higher inflation, led investors to shift away from defensive assets," Lowcock explained.
The top end of the performance charts was more of a mixed bag, with no one theme jumping out. LF Odey Absolute Return topped the charts, returning 13.2%.
"This high conviction strategy can be extremely volatile as bets by its fund manager, James Hanbury, often result in big gains or losses," cautioned Lowcock.
Meanwhile, Premier UK Growth, gaining 10.6%, benefited from its UK smaller companies bias, including a strong rebound from Boohoo.
Other top performers in August included Aptus Global Financials, returning 11.9%; LF Access Long-Term Global Growth Investment (11.6%); SVM Continental Europe (11.2%); and Baillie Gifford Long-Term Global Growth Investment (10.6%).
"There was no clear trend among the top ten best performing funds last month with the US, emerging markets and even India all featuring," noted Yearsley.
"This is the most diverse it has been in months. If you look at the top 20, it is even more diverse with Japan, Asia and UK smaller companies as well."
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