Overbought shares of large U.S. tech companies and surging cryptocurrencies have fueled the growth of successful U.S. mutual funds and ETFs. The coronavirus pandemic has turned global markets upside down, and funds betting on oil and gas companies have plummeted by almost 100%, according to data from fund tracker Morningstar..

The year was difficult for the $ 21.3 trillion mutual fund market and the $ 4.4 trillion ETF industry. US stocks fell sharply in March before rallying back more than 60%, while bond yields remained near record lows for most of the year after unprecedented action by the Federal Reserve to bolster financial markets and keep interest rates low..

In general, those who bet on high-risk assets were rewarded. According to Morningstar, the best fund of the year, the Grayscale Ethereum Trust, which owns Ethereum, the world’s second largest cryptocurrency after Bitcoin, is up 333.7% in a year as of December 9..

According to CoinShares’ digital asset manager, the fund’s profit figures were achieved during a cryptocurrency rally led by retail investors, bringing total assets invested in crypto funds to a record $ 15 billion, up from $ 2.57 billion at the end of 2019..

The tech sector has clearly benefited from the pandemic as people move from offices to work from home and do business via video calls, ordering goods online. The Bank of Montreal MicroSectors FANG + 3X Leveraged ETN and Bank of Montreal MicroSectors FANG + 2X Leveraged ETN – both leveraged to invest in so-called FANG tech stocks like Facebook Inc and Netflix Inc – reported returns of 301.9% and 201. 9% respectively, making them the second and third in the top three funds in 2020.

Among actively managed, non-leveraged funds, the ARK Innovation ETF showed the best overall return with a 143.8% gain, followed by a 141.4% gain at the American Beacon ARK Transformational Innovation Fund and a 139.7% gain at Morgan Stanley. Institutional Discovery fund.

According to Morningstar, nearly all of the top 10 US equity funds manage concentrated portfolios with fewer than 50 shares, and in some cases, more than 10% of their assets are held in a single company..

These big bets helped pay off during a big market rally that pushed several asset classes to all-time highs and lifted S&P 500 more than 65% from lows reached in mid-March, when much of the US economy closed due to the spread of the coronavirus.

Shares of tech giants and cryptocurrencies have influenced the state of American funds

«When fund managers place big bets on a few growing companies, they succeed, but they can fly away.», – considers Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA.

At the same time, the worst performers were those funds that made a long bet on the shares of oil and gas companies. They fell sharply this year due to a collapse in demand, which in April for the first time in history drove oil futures into negative territory for a short time..

ETF Direxion Daily S&P Oil & Gas E&P 2X Down 97.3% YoY, followed by Direxion Daily Junior Gold Miners Bear 2X ETF, Down 95.5% YoY.

Among actively managed equity funds, Highland Small Cap Equity showed the worst performance in a year – a decline of 51.1%.

American Funds, meanwhile, was the most successful bridging major bond fund this year, gaining 17.7%. According to Morningstar, about 43% of the fund’s portfolio is Treasury bonds, double the weight of its benchmark index. Its results were about 18% higher than the worst fund in this category in a year, Putnam Mortgage Securities A, which has about half of its portfolio in cash and less than 1% of its holdings in Treasuries..

Best articles

By admin