NEW YORK (Reuters) – Disproportionate bets on major U.S. tech companies and emerging cryptocurrencies have fueled the best performing mutual funds and exchange-traded funds of the year, while the coronavirus pandemic has affected global markets, while funds betting on companies of oil and gas were down almost 100%, according to data from the Morningstar fund tracker.
The year was a challenge like few others for the $ 21.3 trillion mutual fund and the $ 4.4 trillion ETF industry. US stocks plunged in March, before staging a recovery of more than 60%, while bond yields fell close to record lows for much of the year, after unprecedented moves by the Federal Reserve to support financial markets and maintain low interest rates.
Overall, those who played risky assets were rewarded. The best fund of the year, Grayscale Ethereum Trust, which owns ethereum, the world’s second largest cryptocurrency after bitcoin, shot up 333.7% in the year through December 9, according to Morningstar.
The fund’s gains came during a recovery led by retail cryptocurrency investors that pushed total cryptocurrency assets to a record $ 15 billion, up from $ 2.57 billion at the end of 2019, according to the manager. of CoinShares digital assets.
Technology was another clear winner of the pandemic, as people moved from the office to work at home and conducted business by video call while ordering products online. Bank of Montreal MicroSectors FANG + 3X Leveraged ETN and Bank of Montreal MicroSectors FANG + 2X Leveraged ETN – both 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 funds in the year through December 9.
Among the actively managed funds that do not use leverage, ARK Innovation ETF showed the best overall returns with a gain of 143.8%, followed by a gain of 141.4% in the American fund Beacon ARK Transformational Innovation and a gain of 139, 7% in the Morgan Stanley Institutional Discovery Fund.
Almost all of the top 10 US equity funds manage concentrated portfolios that hold less than 50 shares and, in some cases, have more than 10% of their assets in shares of a single company, according to Morningstar.
These big bets helped to pay during a broad market recovery that pushed several asset classes close to historic highs and brought the S&P 500 up more than 65% since the low it hit in mid-March, when much of the US economy closed to prevent the spread of the coronavirus.
“When fund management shifts to fences with big bets on a handful of growth names, they will have home runs, but they can also lose,” said Todd Rosenbluth, CFRA’s head of ETF and mutual fund research.
The worst performing funds, in turn, were those that bet on oil and gas stocks, which plunged this year due to a collapse in demand that for a brief period turned oil futures in April for the first time in history.
The Direxion Daily S&P Oil & Gas E&P 2X ETF fell 97.3% in the year, followed by the Direxion Daily Junior Gold Miners Bear 2X ETF, which fell 95.5% in the year.
Among the actively managed equity funds, the Highland Small Cap Equity fund had the worst return of the year, with a fall of 51.1%.
Meanwhile, the best performing intermediary bond fund of the year was the American Funds Strategic Bond fund, with a 17.7% gain. The fund has about 43% of its portfolio in Treasury bills, double the weight of its benchmark, according to Morningstar. Its performance was about 18 percentage points ahead of the worst performance 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 in Treasury securities.
Reporting by David Randall; Editing by Megan Davies and Andrea Ricci