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BLOG: Four investments defying the odds in 2022

Paloma Kubiak
Written By:
Paloma Kubiak

Type ‘average return of the global stock market’ into Google, and you’ll see the results are pretty unanimous: 10% per annum.

But, as we’ve seen over the past few years, this ‘average’ can mask some pretty dramatic highs and lows.

Take February 2020 for example. As the consequences of the global pandemic and lockdowns dawned on markets, they fell some 25% in the space of a single month – to then rise almost 80% by the end of 2021.

This year, a quick look at the Apple ‘stocks’ app shows that almost every single major stock market around the world is in the red. Even bonds – which are supposed to be less risky than equities – have seen their values fall considerably.

But there have been some investments that have defied the odds and produced positive returns despite all the uncertainty and disruption.

1) Commodities

Investment funds investing in commodities – which are raw materials or agricultural products – have been the outstanding performers of 2022 so far, with the average fund returning almost 18% for investors.

Why? Well, it’s mainly down to the energy companies. They tend to do well in inflationary times anyway, but when supply is disrupted as much as it has been this year, prices really have only one way to go: up. People have been travelling more and the war in Ukraine has been another major factor.

Higher gas prices have also led through to higher fertilizer costs and higher food prices, as a result. The loss of some food exports from Ukraine has also pushed up agricultural commodities.

Funds to consider in this sector: BlackRock World Mining Trust and Guinness Global Energy.

2) Latin American equities

Latin American equity funds have returned just over 16% on average this year. Much of this performance has come from the region’s largest market, Brazil.

Brazil is one of the biggest exporters in the world of many commodities and this has helped both its currency and its stock market this year. Another factor is that emerging market central banks are ahead of their developed market peers when it comes to tackling inflation.

Brazilian interest rates are 13.75% versus inflation of 6.5% – almost the opposite of the developed world. The country is also used to periods of high inflation and with real rates already very high, is well on top of the situation.

Funds to consider in this sector: abrdn Latin American Equity and Barings Latin America.

3) Infrastructure

It’s a bit of a mixed bag with infrastructure. Investors like the fact that many companies and projects in this sector have inflation-linked cash flows and real assets which give good inflation protection.

Infrastructure is also linked to commodities via things like oil and gas pipelines, so they also tend to do a bit better when the underlying commodities are doing well. Renewable energy infrastructure was also doing well until recently when it was hit by talk of windfall taxes.

The average fund in this sector is up 2% year to date.

Funds to consider in this sector: First Sentier Global Listed Infrastructure and M&G Global Listed Infrastructure.

4) Indian equities

Inflation has also been surprisingly well contained in India. Its economy is not heavily reliant on imports or exports meaning it is less exposed to the global economy than many other countries. For this reason, the currency has held up very well, benefiting investments in the country. The average Indian equity fund is up 0.5% year to date.

India also has a young very large ambitious population and is coming from a very low base in terms of GDP per capita. For this reason, India is leading the world in economic growth. Another benefit to India is the collapse in Chinese equities this year, concerns about geopolitical tension, zero Covid and a government crackdown have sent international investors scurrying for the exits in China. It’s likely some of that money has moved to India.

Funds to consider in this sector: Goldman Sachs India Equity Portfolio and Alquity Indian Subcontinent.

Juliet Schooling Latter is research director at FundCalibre