NEW YORK (Reuters) – Oversized bets for large U.S. technology companies and emerging cryptocurrencies fueled the U.S. mutual fund and publicly traded funds with the best performance of the year as the coronavirus pandemic increase global markets, while funds betting on oil and gas companies fell close to 100%, according to data tracker Morningstar.
The year was a challenge like few for the $ 21.3 trillion investment fund and $ 4.4 trillion ETF. US stocks fell in March before recovering 60%, while bond yields remained near record lows for much of the year following unprecedented moves by the Federal Reserve to support financial markets and keep low interest rates.
In general, those who played risky assets were rewarded. The best fund of the year, Grayscale Ethereum Trust, which holds ethereum, the world’s second-largest cryptocurrency after Bitcoin, rose 333.7% during the year to Dec. 9, according to Morningstar.
The fund’s gains came during a rally led by retail investors in cryptocurrencies that pushed total assets invested in cryptocurrencies to a record $ 15 billion, from $ 2.57 million at the end of 2019, according to the CoinShares digital asset manager.
Tech was another clear winner of the pandemic, as people moved from offices to work from home and did business via video calls while ordering products online. Bank of Montreal MicroSectors FANG + 3X Leveraged ETN and Bank of Montreal MicroSectors FANG + 2X Leveraged ETN, both of which use leverage to invest in so-called FANG technology stocks such as Facebook Inc. and Netflix Inc., returned 301.9% and 201.9% respectively, making them the second and third best performing fund of the year through December 9th.
Among actively managed funds that do not use leverage, the ARK Innovation ETF achieved the best overall returns with a gain of 143.8%, followed by a gain of 141.4% in the US fund Beacon ARK Transformational Innovation and 139 , 7% of the Morgan Stanley Institutional Discovery Fund.
According to Morningstar, nearly all of the top ten U.S. equity funds have concentrated portfolios that hold less than 50 shares and in some cases have more than 10% of their assets in single-company shares.
These big bets helped bear fruit during a broad market rally that has driven several asset classes close to all-time highs and raised the S&P 500 by more than 65% from lows in mid-March. , when much of the US economy closed to prevent the spread of coronavirus.
“When fund management heads to the fences with big bets for a handful of growth names, they’ll hit the races, but they could also end,” said Todd Rosenbluth, head of ETF and mutual fund research of CFRA.
The worst-performing funds, meanwhile, were the ones that long betted on oil and gas stocks, which fell this year due to a collapse in demand that made oil futures negative. briefly in April for the first time in history.
The Direxion Daily S&P Oil & Gas E&P 2X ETF fell 97.3% during the year, followed by the Direxion Daily Junior Gold Miners Bear 2X ETF, which fell 95.5% during the year.
Among actively managed equity funds, the Highland Small Cap Equity fund recorded the worst return of the year with a decline of 51.1%.
Meanwhile, the best performing intermediate basic bond fund of the year was the American Funds strategic bond fund, with a gain of 17.7%. According to Morningstar, the fund holds approximately 43% of its portfolio in Treasuries, double its benchmark. Its return was approximately 18 percentage points above the worst return of the year in the category, the Putnam Mortgage Securities A fund, which has about half of its cash portfolio and less than 1% of its assets to the Treasury.
Report by David Randall; Edited by Megan Davies and Andrea Ricci