Which Funds Have Been Hit Hardest by Coronavirus?

UPDATED: Money market funds are the only asset class delivering positive returns, while fixed income has entered negative territory

Annalisa Esposito 03/04/2020 23:09:00
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The outbreak of the coronavirus has sent global stock markets spiralling downwards, as panicked investors worry over the long-term implications of the epidemic on the global economy. The Bank of England has already taken stark action cutting interest rates to an all-time low of 0.1%

While in January the spread of the disease did not negatively affect every asset class (with fixed income, convertibles, money market funds and property assets in positive territory at the time) things have dramatically changed since then.

Morningstar Direct analysis shows that, on average, the only funds to deliver positive returns in the past month are money market funds (the only green rectangle in the below heatmap).

Investors seeking safer, liquid assets have poured almost £5 billion into these funds over the past year. And while equity funds have suffered amid the stock market turmoil, the average money market fund has delivered a positive return of 4.8% in the past month. That compares with an average return of -3.8% from fixed income, and -4.9% from property funds over that period.

The chart below shows the returns of each asset class in the month to date; the size of the box is denoted by the amount of assets under management in the group.


Source: Morningstar Direct, data as of March 20, 2020.

Equity funds were the hardest hit, on average down 17.6% in March so far. This is, perhaps, unsurprising at a time when the UK stockmarket suffered its worst single day fall since 1987 down almost 11% on March 12. The US, meanwhile, has seen its biggest plunges since the depths of the financial crisis in 2008.

Allocation funds, meanwhile, are down an average of 9.7% month to date. These multi-asset funds are mostly composed of equities and bonds. This diversification often makes them an attractive option at times of uncertainty but in the recent chaos, equities and bonds alike have been hit and there have been few places for investors to hide.

Few Places for Investors to Hide

Indeed, whereas many investors may expect fixed income assets to soar while global equities are spiraling, bonds have also found themselves in negative territory. The average fixed income fund is down 3.8% so far in March.

Driving this is the flood of monetary stimulus which central banks have unleashed on markets, pushing down the price of fixed income assets. Fears of widespread bankruptcies in the event of a global recession has also made many investors nervous of holding corporate bonds.

While the outbreak of the coronavirus was first reported on December 31, 2019, in developed markets it is the past few weeks which have brought the most extreme stock market movements.

Equity and allocation funds have done especially badly year to date, down 23% and 11.8% respectively. While fixed income funds were in positive territory in January (producing a positive return of 3.6%), recent movements have forced them into the red and the funds are down an average of 1.4% year to date and 3.8% in March.

Money Market funds remain the only group in the black, up 6.3% year to date, returns have pulled back slightly amid the latest turmoil but they are still posting an average positive return of 4.8% so far in March.

The below chart shows the performance of funds in the year to date compared with the month to date.


Source: Morningstar Direct, data as of March 20, 2020.

This article was originally published March 5, 2020. Data and charts have since been updated


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About Author

Annalisa Esposito  is a data journalist for Morningstar.co.uk

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