Investors have had to deal with a lot over the last three months, from the US Election and UK Autumn Budget to changing interest rate expectations. And this has come with its fair share of stock market volatility.
At the start of August stock markets had a short, sharp, wobble. The best example was the Japanese stock market. It fell by 12% in a single day, the largest fall in a single day since the 1980s, only for it to broadly recover those losses over the following week.
The cause of this volatility?
Concerns around the strength of the US economy alongside potential for the Japanese central bank to raise interest rates.
Similarly, bonds have risen and then fallen in value over the period. This has been driven by changing expectations around interest rates, as well as investor worries leading up to the US Election (and to an extent here in the UK, the Autumn Budget).
Here’s a look at which markets did best and worst over the quarter and the impact that’s had on mixed asset funds.
This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice. Investments and any income they produce can fall as well as rise in value, so you could get back less than you invest. Past performance isn’t a guide to the future.
How have stock markets performed?
Stock market returns over the three months to the end of October have been quite varied. Even with the variation, the MSCI All Country World index has grown by 2.58%* over this period.
The Chinese stock market has rallied strongly off the back of the stimulus announced from the People’s Bank of China.
The MSCI China index has risen by 17.67% over the three months, which has helped to bring 12-month performance back closer to other regions.
However, this index is still the worst performer of the major global stock markets over 12 months with a return of 15.15%.
The worst-performing index over this three-month period has been MSCI Japan, which returned -3.92%.
This has hurt what had been some strong performance from Japan’s stock market, and puts the 12-month return at 15.85%, just ahead of China.
Both China and Japan have returned around half of the return achieved by the US stock market over the last 12 months, with the MSCI USA index returning 30.63%.
Nvidia, now one of the world’s biggest companies, has driven large gains in the US stock market, as have some of the other ‘Magnificent Seven’ stocks.
How have bonds performed?
Bonds have also had a mixed three months.
The 10-year UK Gilt yield has increased from around 4% at the end of July to nearer 4.5% at the end of October.
Yields and prices move in opposite directions, so that means these government bonds have lost value.
10-year US Treasuries have seen similar moves, with their yield increasing from just above 4% at the end of July to around 4.4% at the end of October.
Even though prices of many bonds have fallen, the yields available have meant that many bond funds have still provided positive returns overall.
For this reason, it isn’t a surprise to see the IA Sterling High Yield sector as the strongest performer over this short period. This has built on strong performance, meaning it remains the strongest performer over 12 months, having returned 14.49%.
Index-linked gilts have continued to lag other types of bonds, with losses of 2.25% over the three months and returns over 12 months being only 5.04%.
How have mixed asset and total return funds performed?
Funds invested more in shares than in bonds have seen better returns over the past five years.
Funds in the IA Flexible Investment and IA Mixed Investment 40-85% Shares sectors performed best over this period because they generally invested more in shares.
This trend has kept going over the past year.
The best-performing mixed asset sector over the last 12 months was the IA Mixed Investment 40-85%, which returned 16.77%*.
Funds in this sector tend to have a large amount invested in shares, which has helped them perform more strongly over the last 12 months.
The worst-performing sector was the IA Targeted Absolute Return sector. The average fund in this sector returned 8.26%*.
These funds are usually more defensively invested, and we don’t expect them to keep pace in strongly rising markets.
Performance of mixed asset and total return sectors over 12 months
Annual percentage growth
Oct 19 – Oct 20 | Oct 20 – Oct 21 | Oct 21 – Oct 22 | Oct 22 – Oct 23 | Oct 23 – Oct 24 | |
|---|---|---|---|---|---|
IA £ High Yield | -0.19% | 9.78% | -11.77% | 6.85% | 14.49% |
IA Flexible Investment | 0.41% | 21.06% | -10.07% | 1.90% | 16.31% |
IA Mixed Investment 0-35% Shares | 0.19% | 7.20% | -11.77% | 0.86% | 11.23% |
IA Mixed Investment 20-60% Shares | -1.82% | 14.61% | -10.79% | 1.70% | 13.64% |
IA Mixed Investment 40-85% Shares | -0.91% | 19.96% | -10.52% | 2.00% | 16.77% |
IA Targeted Absolute Return | 0.47% | 6.58% | -1.56% | 3.05% | 8.26% |
IA UK Index Linked Gilt | 9.45% | 4.57% | -33.81% | -12.09% | 5.04% |
MSCI China | 35.48% | -14.27% | -37.87% | 15.13% | 15.15% |
MSCI Japan | 0.79% | 13.44% | -9.96% | 11.23% | 15.85% |
MSCI AC World | 5.50% | 30.04% | -4.25% | 5.37% | 25.91% |
MSCI USA | 11.67% | 35.21% | -0.57% | 4.45% | 30.63% |
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How have our Wealth Shortlist funds performed?
Our Wealth Shortlist funds have performed differently over the past 12 months. But with different approaches and objectives, we don’t expect them to perform in the same way.
Remember, 12 months is a short time when looking at investment performance. Investments should be held as part of a diversified portfolio for the long term – that’s at least five years.
Investing in these funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, including charges, see the links to their factsheets and key investor information.
Baillie Gifford Managed
Baillie Gifford Managed was the strongest-performing Wealth Shortlist fund in this sector over the past 12 months. It returned 21.31%, above its IA Mixed Investment 40-85% peer group average of 16.77%.
The fund invests in shares, bonds, and cash, but with a focus on shares. The shares part of the fund tends to focus on developed markets like the US, UK, and Europe.
Over the last 12 months, shares added the most value. With the amount invested in shares, it’s expected that this will have the biggest impact on overall fund performance.
Investments in the shares of Nvidia, TSMC and Spotify were particular highlights for the fund.
Bonds also gained in value, in particular their investments in more risky high yield bonds. But this lower portion invested in bonds overall means the gains had less of an impact when compared to the shares the managers invested in.
The manager can invest in emerging markets, high yield bonds and derivatives, all of which add risk if used. Please note that the fund holds shares in HL Plc.
Troy Trojan
Troy Trojan was the worst-performing Wealth Shortlist fund in the sector over the last 12 months – it returned 8.19%.
The managers aim to grow investors' money steadily over the long run, while limiting losses when markets fall, rather than trying to shoot the lights out and perform strongly at all times.
It invests in a diversified set of shares, bonds and gold. Its investments in all three areas have added value over the last 12 months, with gold providing the strongest return to the fund.
However, in a period where stock markets have risen a lot, it’s no surprise to see this mix of assets return less overall than many funds with more invested in shares.
The managers can invest in smaller companies, which adds risk. While the fund contains a diverse range of investments, it’s concentrated. This approach means each investment can contribute significantly to overall returns, but it can increase risk.
Annual percentage growth
Oct 19 – Oct 20 | Oct 20 – Oct 21 | Oct 21 – Oct 22 | Oct 22 – Oct 23 | Oct 23 – Oct 24 | |
|---|---|---|---|---|---|
Baillie Gifford Managed | 27.06% | 18.23% | -29.08% | 1.24% | 21.31% |
IA Mixed Investment 40-85% Shares | -0.91% | 19.96% | -10.52% | 2.00% | 16.77% |
Troy Trojan | 6.57% | 12.15% | -2.23% | 1.16% | 8.19% |