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Alternative Energy Funds Were 2020's Best Performers: Refinitiv Lipper

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2020 was a banner year for equity mutual funds and ETFs, which posted an average 15.63% return, but alternative energy funds far outpaced those gains, according to Refinitiv Lipper.

Alternative energy funds returned 98.98%, which was the strongest one-year return in the history of the fund tracker’s equity universe, which dates back 50 years. It was the best-performing category for domestic and world sector equity funds for 2020. Global science and technology funds gained 65.31%.

On the flip side, natural resources funds had their worst one-year performance among U.S. funds in 2020, dropping 28.75%, while global real estate funds were the poorest performers among global funds, losing 5.05% of their value.

Climate change was clearly a major theme in the performance of the equity sector funds.

Overall U.S. diversified equity funds gained 19% in 2020 while alternative funds, investing in hedge-fund like strategies, suffered the biggest one-year decline, down 1.86%, due to a 46%-plus loss posted by dedicated short bias funds.

Despite a raging pandemic which sent much of the global economy into recession, funds overall posted only one negative quarter during 2020 — for the first quarter. By the fourth quarter, news that two COVID-19 vaccines proved effective and would soon be distributed plus renewed hopes of another economic relief package in the U.S. buoyed equity markets. The Dow Jones Industrial Average and S&P 500 posted record closing highs on the last trading day of the year, and the Nasdaq composite ended with a 43.64% gain, its  best one-year return since 2009.

The average equity fund posted a 16.62% gain for the fourth quarter with U.S. diversified equity funds, leading the way, up almost 19%. One hundred of Lipper’s 104 equity and mixed equity fund classifications posted positive returns for the quarter.

— Check out Bob Doll’s 10 Predictions for 2021 on ThinkAdvisor.