Twenty years of 21st century investing

I’m not sure where the past 20 years have gone. But here we are, just days away from the end of the second decade of the millennium. And it’s been eventful in the investment world.

It started with the tech bubble bursting and the Euro coming into circulation. We’ve had two bear markets, two bull markets and the global financial crisis. Bitcoin became all the rage, China became a major market and the UK voted for Brexit. The list goes on.

I thought it might be interesting to take a look at what the best – and worst – performing investments have been over the period. Some may surprise you.

Best performing funds

Over the past twenty years, the best funds have been those investing in Chinese equities. The average fund in this sector is up 539%^. Next are those investing in European smaller companies (up 390%^), followed by our own UK smaller companies (388%^).

The best performing fund over all is Marlborough Special Situations (up 1172%^), which has been managed by Giles Hargreaves for the entire period. He has turned £1,000 into £12,720^.

Rather scarily, the average Japanese equity fund has returned the same amount as the average cash fund (39%)^. It just goes to show that a prolonged deflationary environment can really stifle investment.

Top ten funds of the 21st century^



£1,000 invested now:

1 Marlborough Special Situations £12,719.73
2 ASI UK Smaller Companies £10,232.39
3 The MI Discretionary Unit £10,109.73
4 Investec UK Smaller Companies £9,923.29
5 Schroder US Smaller Companies £9,733.05
6 Stewart Investors Asia Pacific  £9,520.21
7 TB Amati UK Smaller Companies £9,432.96
8 Schroder ISF Greater China £9,189.73
9 Baillie Gifford Global Discovery £8,918.88
10 Threadneedle European Smaller Companies £8,866.90

Each decade in more detail

Looking in more detail at each of the two decades also makes for interesting reading. The first was dominated by technology stocks tanking (the average fund fell 57%*), commodities booming (gold rose 257%* and oil rose 219%*), and emerging markets heading off to the races (the average emerging markets fund rose 200%*).

In contrast, the UK stock market was up a mere 9%* while the US stock market fell 14%*. And, if you ever needed proof that bonds have enjoyed a prolonged bull market, look no further: the average boring, safe, index-linked government bond fund returned 62%*.

The second decade saw a reversal of fortunes. The commodities super-cycle came to an abrupt end and emerging markets funds have lagged returning 70%**. The UK stock market is up 107%** and the US market is up 315%**. Technology funds are up 317% on average** - but it did take them until 2016 to recover their losses. The exception has been those index-linked gilt funds. They rose a further 111%** over the last ten years.

What will the next 10-20 years hold?

The only thing I can say with real conviction is that I don’t think bonds will do as well. The high returns have been made because yields have fallen from around 5% to 0.7%. I can’t see them falling much lower.

I’m pretty sure that emerging market funds – Asian equity funds in particular - will have their day in the sun once again. I’m also pretty sure Japanese equities will do better.

However, the one enduring theme I think we will experience over the next two decades is the move towards more responsible investing. It’s now or never really in terms of our environment.


^Source: FE Analytics, total returns in sterling, 31 December 1999 to 30 December 2019, using IA sector averages.
*Source: FE Analytics, total returns in sterling, 31 December 1999 to 31 December 2009, using IA sector averages, the FTSE 100, S&P 500, S&P GSCI Gold Spot GTR and Commodity Prices Oil Price Brent Crude.
**Source: FE Analytics, total returns in sterling, 31 December 2009 to 30 December 2019, using IA sector averages, the FTSE 100, S&P 500, S&P GSCI Gold Spot GTR and Commodity Prices Oil Price Brent Crude.

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. Darius's views are his own and do not constitute financial advice.

Published on 01/01/2020