Most and least volatile funds during COVID-19
Asian and emerging market equities have been the least volatile equity sectors while Australian equity has been the most volatile since the start of the year and the COVID-19 pandemic, according to data.
According to FE Analytics, the Asia Pacific single country sector was the least volatile at 16.01 since the start of the year to 30 April, 2020. This was followed by Asia Pacific ex Japan (19.47), emerging markets (20.6), and global equities (27.3).
Least volatile equity sectors since start of year to 30 April 2020
|
Sector |
Volatility |
Max drawdown |
|
Asia Pacific single country |
16.01 |
-13.96% |
|
Asia Pacific ex Japan |
19.47 |
-16.48% |
|
Emerging markets |
20.61 |
-19.55% |
|
Global equities |
27.31 |
-21.35% |
Three of the five least volatile Asia Pacific single country funds were China equity funds, and the remaining two were Japanese equity focused.
The Fidelity China fund was the least volatile at 14.99 and placed in the top quartile when it came to its max drawdown of -9.04%.
The fund’s latest quarterly report said that China remained attractive for capital inflows in the long-term as it offered strong structural growth opportunities and had a significant demographic advantage.
“During this phase of heightened uncertainty, it is quite important to focus on asset-based valuations and on dividend cushions versus discounted cashflows, which in themselves are hard to predict with a degree of accuracy,” it said.
“A hugely under-recognised opportunity in China is the income paradigm and this can also provide a cushion as Chinese dividend trends diverge from the rest of the world.”
Most volatile equity sectors
This was compared to the most volatile sectors that mostly had an Australian equity focus – Australia geared equities (58.09), global hedged equities (44.39), Australian small/mid cap (41.43), and Australian equities (36.86).
Most volatile equity sectors since start of year to 30 April 2020
|
Sector |
Volatility |
Max drawdown |
|
Australian geared equities |
58.09 |
-47.13% |
|
Global hedged equities |
4.39 |
-31.12% |
|
Australian small/mid cap equities |
41.43 |
-33.22% |
|
Australian equities |
36.86 |
-30.05% |
Looking at the Australian small/mid cap equity sector, the most volatile fund was Forager Australian Shares with a volatility of 64.38. Its max drawdown was the largest in the sector at -50.3%.
The fund’s latest quarterly report said the fund’s investments suffered share price declines that were worse than the market.
“Some, like tourism related investments, have been affected directly by border closures and travel restrictions. Others are being affected by the sudden economic shock. But even the relatively immune investments saw sharp share price declines as investors panicked en masse,” it said.
Two of the fund’s largest investments – mining software provider RPM Global and mining services provider Macmahon – had their share price almost halved during March but both rebounded down by a third.
The fund was also offering a buyback for up to 10% of fund’s units on market over the next 12 months to improve the net asset value for unitholders.
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