Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
By asset type, no fund group reported an average gain in October, with commodities funds down 20.66% and equity portfolios down 22.39%.
Commodities funds delivered an average loss for the fourth successive month with the amount accumulating to 42.52% from July to October. Natural resources prices continued to undermine the returns of commodities funds. They fell on persistent concerns that the demand for commodities would be reduced as the global financial meltdown went from bad to worse and on anticipation that the global economy was entering a deep recession.
Crude oil futures fell 32.6%, while copper futures lost 35.6% in October. Corn and soybean futures declined 17.7% and 12.1%, respectively. Precious metals û gold and platinum û fell 16.9% and 18.7%, respectively, in October, on easing inflationary expectations as crude oil prices fell. The continuing recovery of the US dollar, regarded as a safe-haven currency in a turbulent global financial market environment, in October also posed as a negative catalyst to precious metals prices.
Equity funds delivered an average loss of 22.39% in October, the fifth straight month of average losses, amounting to 44.20%. Posting relatively smaller average losses for the month were Equity Sector Biotechnology (-12.37%), Equity Sector Pharmaceutical & Health (-14.00%), and Equity Sector Telecommunication Services (-15.06%), which are generally less affected by the economic cycle. Equity Japan Small- and Mid-Cap (-12.68%) and Equity Japan (-15.62%) also lay at the high end of the performance table.
Meanwhile, emerging markets and natural resources equity funds such as Equity Indonesia (-44.76%), Equity Sector Gold & Precious Metals (-37.10%), and Equity Emerging Markets Europe (-35.01%), which are generally more volatile than developed-market and non-cyclical sector equity funds, lay at the low-end of the performance table for another month.
As for individual equity funds only two of the 1,057 equity funds û JF Ultra Japan (+6.94%) and Value Partners China Greenchip Limited (+0%) û did not post losses in October. October was also the second consecutive month that these two equity funds did not incur losses. One possible explanation that allowed these two equity funds to outperform their peers might be that they did not make any substantial investments in equities during the month, says Eric Wong, head of research at Lipper. The portfolio configuration of JF Ultra Japan was around 90% allocated to bank deposits at the end of September 2008.
Other equity funds that were among the top 10 equity funds in October, according to Lipper, included: Lyxor Global Opportunities Equity (-1.80%), Lyxor Oracle Stars (-3.15%), and Topaz 80% Global Growth Protector (-3.87%), which are all equity global funds. The 10 worst performing equity funds in October were dominated by equity China and equity Indonesia funds, including Allianz RCM Indonesia (-48.35%), Lyxor China A/H Shares Opportunities (-45.85%), and International Opportunities Funds Indonesia Equity (-45.82%).
Bond funds declined an average 10.74% in October, their fifth straight month of losses to 18.02%. Bond JPY (+6.70%) outperformed all other fund groups as the Japanese yen gained 7.2% against the US dollar û the second straight monthly gain. The Japanese yen continued to be supported by investors unwinding their JPY-financed carry-trades as the global financial markets maintained their downtrend in most of October. Bond HKD (+0.81%) reported an average positive return in October because of the currency peg between the Hong Kong dollar and the US dollar. The greenback sustained its gain against many other currencies in October as currency traders regarded the greenback as a safe-haven currency in a turbulent global financial market environment. As such, bond funds investing in Hong Kong dollar, Japanese yen, and US dollar fixed-income securities occupied the high end of the performance table.
The 10 best performing bond funds, including Parvest Japan Yen Bond (+7.70%), UBS (Lux) Bond FundûJPY (+5.70%), InvescoHK$ Bond (+1.86%), and SGAM Fund Bonds US Mortgage Backed Securities (+1.30%), all shared these features. Meanwhile, with global equity markets continuing to struggle and risk appetite contracting in October, bond funds investing in convertible, emerging markets, and high-yield bonds underperformed other bond fund groups and lay at the low end of the performance table for another month.
The 10 worst performing bond funds, including Aberdeen Global-Euro High Yield Bond (-37.00%), Fidelity Funds û Asian High Yield (-35.78%), and JPM Emerging Markets Debt (-34.04%), were mostly of these types.
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