It truly has been an Indian summer for investments
The Cazoo St Leger Day is back at Doncaster this weekend. The oldest of Britain’s five horse-racing Classics, and the last of the five to be run each year, it marks the end of the summer sporting social calendar… and the day some market timers reinvest.
The investment adage says that investors should “Sell in May and go away, come back on St Leger Day”. It refers to the time when stock market traders spent the summer attending such sporting events and, as a result of less trading, and their eyes not being on the investment ball (pardon the pun), any sudden market sell-offs were amplified. Therefore, it was suggested, investors were better off selling their holdings in May and investing again on St Leger Day in September.
Did the adage pay off this year?
Anyone following the adage this year would likely be kicking themselves right now. Unlike the weather, investments in the main have been shining.
49 out of 54 IA sectors have had positive returns over the summer. The IA European Smaller Companies sector had the best result, with the average fund returning 11.43%*. IA UK Smaller Companies was next (up 10.87%*) and IA UK Index Linked Gilts was third with returns of 10.52%*. IA Property Other was in fourth place (10.41%*) and IA Technology and Telecommunications in fifth (10.37%*).
The five sectors that had negative returns were IA China/Greater China (-6.28%*), IA Asia Pacific ex Japan (-0.94%*), IA EUR Corporate Bond (-0.53%*), IA EUR Mixed Bond (-0.09%*) and IA Short Term Money Market (-0.05%*).
Indian equity funds do best
What the headline data hides is the fact that, when it comes to individual funds, Indian equity portfolios have performed best this summer. Most of these funds currently sit in the IA Specialist sector, but a new IA Indian/Indian Subcontinent sector is being launched this week, which means these funds will have more visibility in future.
12 of the top 20 performing funds available on the Aegon platform were Indian equity portfolios.
The best performing fund over all was Alquity Indian Subcontinent, which is on the Chelsea Selection, and returned 30.81%*. Second was Fidelity India Focus (25.14%*), followed by GS India Equity Portfolio (24.71%*) in third place, Matthews India (24.07%*) in fourth place and Liontrust India (24.00%*) in fifth.
At the other end of the table, 17 of the 20 worst performing funds were Chinese equity offerings.
Darius McDermott, managing director of Chelsea Financial Services, said: “The Indian stock market is clearly benefiting from continued domestic interest, given the increasing economic momentum. It remains one of our preferred long-term emerging market investments.
“Chinese equities on the other hand have suffered due to increased regulation by the Chinese government in sectors such as education and technology. This has spooked investors, but we would argue that the sell-off has been overdone and longer term, China still remains an attractive investment option.”
The team behind top performer Alquity Indian Subcontinent fund, added: “All economies move in cycles and India is no exception – since the rather brief but rapid downturn through 2018 into 2019, and despite the COVID-19 emergency throughout 2020 and into this year, India has actually done surprisingly well.
“We have been promoting the idea of a renewed Indian economy for a number of reasons in the last year. If you add in the continued impetus of a strongly reformist and pro-growth government that has been steady in its course, and the ability of India to benefit from changing global trade relationships in the region, you have a very strong case for India to be a dedicated position in the portfolio.
“In August, we met remotely with almost 30 Indian corporates across a variety of sectors in order to reassess our investment thesis for the following 12 months. The economic outlook in fact is more positive than we expected, with most corporates expecting a very strong growth in the upcoming festival season.
“Of course, this view presumes that there is no deterioration in the COVID situation and continued reasonable rainfall during the rest of the monsoon season.”
*Source: FE fundinfo, total returns in sterling, 1 May 2021 to 8 September 2021
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund manager and do not constitute financial advice.