Cold blood and the ability not to follow the pagan herd, especially in times of crisis. This is demonstrated by what happened at the outbreak of the pandemic, between the winter and spring of 2020, in the food industry investment funds. Globally, the bulk of the sector has been taking a foregone conclusion, selling the assets hardest hit by Covid. The funds with the highest pre-pandemic yieldsInstead, they stood out from the crowd, avoiding panic selling in March and resuming shopping in April. In this way, they have once again managed to beat the market.
The behavior of the funds in those months – analyzed in a recent Bank of Italy study – reveals that in March 2020 only North Americans they closed the month on a positive note. And the reason is simple: US and Canadian funds were the only ones not to rush investments to countries less affected by Covid.
In the same period, the funds of the emerging markets they made the opposite choice, continuing to sell stocks most exposed to the pandemic for geographical or sector reasons. A strategy that, in March, led them to record the worst performances on the international market. “The result of the analysis – write the economists of Via Nazionale – suggests that in emerging markets, still little affected by the virus in March (apart from China, which however controls a negligible share of global industry in this sector), the funds response may have been more emotional in the face of what was happening in distant countries".
In general, the majority of funds have sold the stocks most vulnerable to Covid regardless of where it comes from: in order to rebalance the portfolio towards holdings considered safer, the managers have sold both domestic and foreign shares and bonds indifferently (and en masse).
“On the other hand, curiously, the regression shows that April's positive result is totally driven by purchases of non-domestic securities, which are therefore the first to recover after the initial shock - notes Bank of Italy again - This result contradicts the current interpretation according to which foreign investors are more inclined than domestic ones to play a destabilizing role, by overreacting or panicking ”.
Finally, the study underlines that funds characterized by different types of investments (and therefore by a different risk propensity) tend to respond in a heterogeneous way to the crisis: mixed funds and bond funds (more interested in government bonds) rebalance mainly by country, while equities (more focused on companies) adjust the portfolio by shifting between sectors.
