New research released by BMO Global Asset Management suggests that the invasion of Ukraine by Russia has had a deleterious effect on fund performance in recent months.
The BMO Multi-Manager Fundwatch Q1 2022 report found that its consistency ratio for top quartile returns over three years had fallen, by the end of Q1 2022, to 0.45% – a marked drop from the 2.1% registered in the preceding quarter.
Writing in the report, Kelly Prior, investment manager at the firm, said: “The BMO MM Consistency Ratio for top quartile returns over three years (to the end of Q1 2022) has been significantly impacted by the invasion of Ukraine by Russia, and its huge geopolitical impact on resources, different geographies and global interest rates and currency markets. The ratio has tumbled to an all-time low of 0.45% (2.1% last time) with just five of the 1,115 funds achieving this feat. This ratio’s typical range over the time we have been running this research was circa. 2-4%.”
Prior added: “Only five funds from five different sectors manage the consistency of top quartile returns – the sectors are the IA Europe ex-UK, the IA UK All Companies, IA £ Corporate Bond, IA £ Strategic Bond and IA Japan.”
Further on, Prior touched on the current factors influencing the poor performance by funds.
“The three years that this survey covers have been extraordinary for the real world and this has caused significant gyrations in many financial markets and underlying asset classes. To the unprecedented impact of Covid, deflation followed by inflation, the influences of climate change and related ESG considerations, we can now add war and the resulting sanction impacts on commodities, inflation and rates, together with a resurgent interest in long-ignored sectors such as defence. These conditions have conspired to see the lowest consistency figures we have ever seen.”
In speaking about the fund performance, Prior remarked that we are currently in ‘interesting times’.