In a notable reversal, the top-performing global equity fund in 2020 was the worst performer last year. And the second best performing fund in the Asia global equity general category in 2020 was the third-worst in 2021.

This turnaround highlights the substantial shift in markets last year. In particular it shows how many tech-related names that were bought up aggressively during the height of the Covid pandemic have come off heavily in the last few months.

The top holdings of the Emperor IP Global Equity fund are Sea, Cloudflare and Shopify. The share prices of all three soared in 2020 and even through most of 2021. But, in each case, they have given up a lot of those gains in a short space of time.

Sea began 2020 at $40 per share. It climbed as high as $357 a share in November last year, but has fallen almost 50% in just over two months to $180.

 
 
Cloudflare shot up from $17 at the start of 2020 to $211 per share by mid-November 2021. It has since fallen to $98, more than 53% off its peak.

Shopify went from $404 per share at the start of 2020 to $1,690 per share in November last year. It has since fallen 37% to $1,064.

Shopify and Cloudflare also appear in the top 10 holdings of the Anchor BCI Global Equity feeder fund.

For all of these shares, the gains made from the start of the pandemic are still significant. Sea is up 300%, Cloudflare more than 500%, and Shopify has more than doubled. These funds holding them are therefore still showing meaningful gains.

The Emperor IP Global Equity fund is up 36.1% per annum over the past two years and an annualised 22.5% over five years. The Anchor BCI Global Equity feeder fund is showing a two-year annualised return of 40.5%, and a five-year number of 22.5% per annum.

 
Reason for caution?
However, the speed and scale of the losses of many of their holdings is eye-catching. And it is continuing. The Emperor IP Global Equity fund is down -9.9% already this year. The Anchor BCI Global Equity feeder fund is off -7.2%.

While it is true that the majority of global equity funds are down in the first few weeks of this year, the scale of those drawdowns put both funds in the 15 worst performers for the year-to-date.

And it’s not just the smaller tech companies that are showing signs of being under pressure. The Anchor portfolio also includes Alphabet, Tesla and Amazon in its top 10. These counters are off -4%, -13.5% and -5% so far in 2022 respectively.

Of course, this is an extremely narrow time frame. All three of these stocks have suffered larger drawdowns than these in the past 16 months. However, that weakness did not happen at the same time.

While it’s far too early to be definitive, there is clearly good reason to be concerned about the prospects for tech shares, and the funds that hold them. A number of smaller stocks have already taken a beating. There is no sign of that slowing down. And the weakness in larger tech stocks across the board is a new phenomenon.

It’s also obvious that the global equity funds that have held up so far this year largely carry a value bias. The top three performers for the year-to-date are the PSG Global Equity feeder fund, the Absa Global Value feeder fund (which feeds into the Schroder ISF Global Recovery fund) and the Discovery Global Value Equity feeder fund (which feeds into the Ninety One GSF Global Value Equity fund).

Investors are unlikely to find too many tech names in their largest holdings.