Real estate funds fare worst in September for investors

September was a particularly difficult month for investors and competition was quite fierce to determine which funds were the best performers and the worst performers.

Ben Yearsley, Director of Fairview Investing, said: “There aren’t many crumbs of comfort for investors after a torrid September, except that yield and earnings are now much easier to come by. Yields on gilts were so attractive that I bought two last week and became an investor for the first time since 2009.

“Fixed interest generally looks much more attractive now on a risk/reward basis than it has for many years. US Treasuries and gilts have seen yields rise and spreads on some interest rates Fixed interest rates have widened.Yields can of course still increase.

As expected, real estate had a particularly difficult month, occupying eight of the 10 “top spots” in the list of worst performers compiled by Fairview Investing using data from FE Analytics. The only outliers were Columbia Threadneedle’s Overseas Equity Linked UK Inflation fund and Scottish Widows UK Index Linked Tracker fund.

Funds – one month (last 10) Come back %
NFU Mutual UK Property Shares -20.95
Gravis UK Listed Property -20.17
Abrn UK Property Share -20.13
Cohen & Steers European Real Estate Securities -19.93
Janus Henderson Horizon Pan-European Real Estate Equities -19.01
CT European Real Estate Securities -18.81
CT Overseas Equity Linked UK Inflation -17.67
Premier Miton pan-European property sharing -17.52
Scottish Widows UK Index Tracker -17.48
Abrn European Real Estate Share -17.41

Source: FE Analytics

On a more positive note, some stood out and, according to Yearsley, were among the esoteric, trend-oriented or absolute return funds. Oxeye Hedged Income leads the rankings with a return of 18%.

Funds – one month (top 10) Come back %
Income covered by Oxeye +18.09
Fidelity Diversified Markets +13.56
Winton Trend +11.67
PGIM Wadhwani Keynes systematic absolute return +8.11
7 IM Absolute return +7.8
AQR Managed Futures +7.24
NB Uncorrelated strategies +7.17
Diversified Winton +6.73
PGIM Emerging Markets Total Return Bond +6.02
Bluebay Global Sovereign Opportunities +5.76

Source: FE Analytics

There were also ‘normal’ funds in the top 10, such as Axa Framlington Biotech, whose 4.5% gain was fueled by a weak pound, and a fairly resilient healthcare sector.

In fact, beyond a trio of US dollar-denominated bond sectors, healthcare and Latin America were the only asset classes to post a return in September.

Fund sectors – one month (top five) Come back %
USD government bond +1.25
USD Corporate Bond +0.3
USD Mixed Bond +0.1
Health care +0.04
Latin America +0.01

Source: FE Analytics

The fact that only five sectors generated a positive return in September is proof that it was a difficult month – but gilts unsurprisingly felt the brunt of the market turmoil.

Initial reports suggested Chancellor Kwasi Kwarteng had approved £65bn of central bank bond purchases following his badly perceived mini-budgetbut Bloomberg has since reported that figure could be as high as £100bn.

Fund sectors – one month (last five) Come back %
Indexed British gilts -17.63
Property Other -10.83
UK small businesses -9.24
European small businesses -9.09
British gilts -8.39

Source: FE Analytics