We’re now 50 days into lockdown in the UK, although for many of us it will feel like day 500, and during that time there has been some more positive news for investors following the bloodbath during the early part of March.
Markets have recovered some of the ground they lost, the vast majority of funds have delivered positive returns for investors, people have been buying more investments, and many companies have managed to raise cash.
Laura Suter, personal finance analyst at investment platform AJ Bell, comments: “The dark cloud hanging over investors during this time was the axe taken to billions of pounds of dividends, as businesses looked to conserve cash and slash payouts. So as we look forward to the gradual easing of lockdown, what has the first 50 days meant for investors?”
All major markets rose in lockdown
“All major markets have risen since lockdown began on 23 March, showing that despite the global uncertainty and reduced spending in the economy, the market at least thinks a lot of that is already priced in.
The lockdown period was preceded by mass falls in markets and since 23rd March these indices have rebounded. The smallest UK companies rose the most, with the FTSE AIM All Share increasing by 37% during the period, while the FTSE 250 rose by a slightly lower 25% and the FTSE 100 index climbed 19%.
In the FTSE 100 index six companies saw their share prices fall during the 50 days of lockdown, while in the FTSE 350 just 25 companies delivered an investment loss.
“Stateside companies climbed higher, with the S&P 500 index recording a 31% rise in the lockdown period despite death figures from Coronavirus climbing ever higher in the country. Even Asian markets rose, although by lower amounts, with Hong Kong’s Hang Seng index rising 12% and China’s SSE Composite inching forward 9%, as concerns about the country’s ability to rebound prevail.
But dividends everywhere were axed
“A total of 289 dividends were cut or deferred during lockdown, totalling £28.3bn of payouts that won’t be making their way to investors’ pockets. This included 41 FTSE 100 companies, leaving a large hole in income investors’ future payouts. Some equity income managers have predicted cuts to payouts from funds hitting 40% or more, with limited options left for income-seekers.
“The banking giants make up the largest cuts, with over £5bn of dividends cut at HSBC, £1.6bn at Lloyds and just over £1bn at Barclays. Royal Dutch Shell’s near £2bn dividend cut is among the largest and was one of the biggest shocks for investors’ portfolios.”
Largest dividend cuts during lockdown:
|Date announced||Company||Value of dividend cut (£M)|
|30-Apr-20||Royal Dutch Shell||£1,979|
|31-Mar-20||Royal Bank of Scotland||£968|
Which funds were winners and losers?
“During the 50 days of lockdown there was some polarised performance among funds, but investors will find cheer that 98% of funds have made money for investors during that time – a sharp turnaround on the performance we saw just weeks before lockdown officially began when markets were in freefall. Gold funds topped the best performers during the period with ES Gold and Precious Metals delivering the highest return of 55.7%, as investors look to turn to gold in times of trouble, pushing up prices.
“Technology funds have been another standout – as this crisis has seen how technology has become integral to our everyday lives. Whether it’s through various video conferencing services allowing us to work and socialise, Netflix entertaining us with binge-worthy TV or Amazon delivering goods and stopping us having to go to the shops, these technology companies have prospered as they have become essential services for many. US-focused funds have also been among the top risers, fuelled in part by this technology boom but also by the sharp rebound in American markets after falls in February and early March.
“On the flip side, the 81 funds that have delivered a loss are dominated by property funds. The property market has all but ground to a halt during lockdown, meaning it’s almost impossible to accurately price the asset as no sales are happening. While lots of property funds remain suspended, meaning investors are trapped, that hasn’t stopped their values falling as managers write down the value of some assets.
However, the worst performer in the lockdown period was Neil Woodford’s former fund, now called LF Equity Income, which lost investors 16.7%. The illiquid and unlisted assets in the fund will likely have been hit by the wider market downturns, but this fall in value really reflects the fact that investors received some of their money back on 25th March after assets were sold off so isn’t a true reflection of performance.”
|Best performing funds|
|ES – Gold and Precious Metals||55.71|
|Ninety One – Global Gold||54.13|
|BlackRock – Gold & General||53.81|
|MFM – Junior Gold||52.84|
|Quilter Investors – Precious Metals Equity||50.71|
|Baillie Gifford – American||49.08|
|Morgan Stanley – US Growth||48.75|
|Smith & Williamson – Global Gold & Resources||47.79|
|New Capital – US Future Leaders||46.69|
|DMS – Charteris Gold & Precious Metals||46.45|
|Schroder – ISF Global Energy||45.91|
|Goldman Sachs – North America Energy & Energy Infrastructure Equity Portfolio||45.54|
|LF Canada Life – Global Resource||44.9|
|MFM – Techinvest Special Situations||44.15|
|BlackRock – GF World Energy||43.78|
|BlackRock – GF World Mining||42.76|
|Mirabaud – UK Equity High Alpha||42.37|
|LF Miton – UK Smaller Companies||41.05|
|Morgan Stanley – US Advantage||40.03|
|MFM – Junior Oils Trust||39.2|
Source: FE/AJ Bell
|Worst performing funds|
|LF – Equity Income||-16.73|
|ASI – Strategic Investment Allocation||-15.66|
|First Arrow – Diversified||-13.76|
|VT – Moray Place Investment Company||-11.62|
|Aviva Investors – European Property||-7.03|
|Canada Life – UK Property Jersey||-6.8|
|Janus Henderson – Multi Asset Credit||-6.6|
|LF Canada Life – UK Property ACS||-5.56|
|iShares – Overseas Government Bond Index||-5.34|
|Kames – Property Income||-5.09|
|Aviva Investors – UK Property||-4.95|
|Janus Henderson Inst – Overseas Bond||-4.4|
|Pictet TR – Atlas||-4.37|
|Capital Group – Euro Bond (LUX)||-4.26|
|Threadneedle – UK Property Authorised Investment||-4.2|
|Threadneedle – Global Bond||-4.2|
|Standard Life Investments – UK Real Estate||-4.18|
|Scottish Widows – International Bond||-4.13|
|Threadneedle European Bond||-3.96|