Technology & Media was the top-performing investment company sector over the first half of 2020, new data from the Association of Investment Companies (AIC) revealed this week. The sector, which invests in technology businesses whose services have been a lifeline through lockdowns around the world, generated an impressive return of 29%.
Hedge Funds came second, benefitting from the market volatility of the past few months to return 27%. Completing the top three is Biotechnology & Healthcare, up 16% reflecting demand for healthcare equipment and treatments worldwide to combat COVID.
Whilst the average UK-listed investment company was down 6% over the first half of the year, long-term performance remains strong with a gain of 170% over the past ten years.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said:
“The first half of 2020 will be remembered for one thing, but whilst COVID has put huge pressure on health and livelihoods there have still been areas of strong performance, particularly given the rally of the past few months. Our Technology & Media sector is up 29%, reflecting the central role technology has played in our lives in recent months. Whether it’s watching Netflix, chatting on Zoom or keeping in touch with colleagues on Microsoft Teams, technology has been instrumental in helping us all keep going through lockdown.”
Investment companies in the Hedge Funds sector have achieved exactly what they set out to do, namely preserving capital during tough times and providing diversification to portfolios by investing in long and short equity positions as well as other more esoteric assets. Given the global effort to fight COVID, it’s no surprise that the Biotechnology & Healthcare sector is in the top performers too.
“It’s always interesting to look at the best-performing companies and sectors at the end of a half-year period, but it’s important to remember that investment is about the long term,” Brodie-Smith added. “Investors should have a balanced portfolio which suits their needs and if they have any concerns they should speak to a financial adviser.”
Over the six month period to the end of June, most of which has been impacted by COVID-19, investment trusts with a Global mandate returned 10.8%, Insurance & Reinsurance Strategies returned 7.8% and Global Smaller Companies returned 3.6%. Surprisingly, North America trusts were up just 1.4%. The AIC based its returns on sector averages (weighted averages).
“Volatility never feels good, but the foundation underlying it is important,” explained Tony Despirito, co-manager of the BlackRock North American Income trust on Monday. “Daily market moves in response to the COVID-19 outbreak have matched the scale of those seen during the global financial crisis, but we believe this is not 2008. The coronavirus shock is not one caused by a crisis in the core of the financial system and spreading to the rest of the economy. The economy is on a much stronger footing and the financial system is much more robust. In fact, we believe policy measures and safeguards put in place since 2008 have only strengthened the financial system.”