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Analyzing Fund Behavior During COVID-19 and the 2008 Financial Crisis

Companies and Markets

By Matias Park, CFA  |  September 20, 2021

In a span of just two decades, the financial markets experienced two major declines that sparked unprecedented levels of market turbulence: the 2008 global financial crisis and the COVID-19 bear market of 2020. On both occasions, asset managers and funds reacted by selling off investments and reducing the risk exposure of their portfolios. How each fund maneuvered through this turbulence was, in part, determined by its investment style and the different industry segments’ perceived level of exposure.

Here we examine how asset managers shifted their positions in the aftermath of these two events. Our analysis examines the investment patterns observed from the perspective of investment styles and industry segments across six top asset managers.

The Methodology

One of the most popular ways to classify funds is to group them by investment style. For our analysis, we focused on four different fund styles: Value, Deep Value, Growth, and Aggressive Growth. These four styles represent the two ends of the style spectrum and can provide the most contrasting results and a clear, demonstrable outcome.

We considered Deep Value and Value funds as a collective group and Aggressive Growth and Growth funds as the other collective group. A definition of these fund styles is provided in the figure below.


Another key factor of this study is industry segments. During both COVID-19 and the financial crisis of 2008, certain industries were more prone to the impact of the downturns than others, while some sectors even thrived and witnessed unprecedented growth. To understand this trend, we considered the following 12 industry segments, as defined in FactSet’s Revere Industry Business Classification System (RBICS) dataset.

  1. Business Services
  2. Consumer Cyclicals
  3. Consumer Non-cyclicals
  4. Consumer Services
  5. Energy
  6. Finance
  7. Healthcare
  8. Industrials
  9. Non-energy Materials
  10. Technology
  11. Telecommunications
  12. Utilities

There are further sub-categories within each of the above industries and in some cases, up to six levels of classifications. However, for simplicity, this analysis looks at just the top-most level.

With the investment style and industry data at hand, we measured the change in the funds’ positions on a month-on-month (MoM) basis. This was done using the number of shares held by each fund during the periods between November and December 2008 (i.e., the global financial crisis) as well as March to April 2020 (i.e., the COVID-19 crisis). We tracked MoM changes based on the number of shares instead of market value to remove any bias due to price fluctuations.

The Results

Investment Style - Decline and Recovery

Here we present the results from one of the six fund managers we studied. Overall, the trend from the MoM changes revealed that for the two time periods we analyzed, there were across-the-board selloffs, regardless of the fund’s investment style. Fifty-six percent of funds decreased their positions.

This trend was more apparent when considering the investment styles. Looking at our selected asset manager between March and April 2020, we observed that 57% of the Growth funds decreased their positions while only 30% of them increased their holdings. The remaining 13% decided to hold on to their positions. We saw a similar trend with the Value funds, where 48%, 36%, and 16% of funds decreased, increased, and maintained their positions, respectively.

Similar sell-off trends were observed for the MoM changes between November and December 2008 regardless of the funds’ investment style. The figure below summarizes the results.


While these results may be expected given panic selling and the bearish market sentiment among money managers, it is interesting to note how the funds recovered after the market slump.

To study the recovery, we looked at the number of funds that increased their positions versus those that decreased their positions. As indicated by the positive, green bar graphs shown in the figure below, Growth funds were more aggressive in recovering their positions in the months immediately following the crash.

For our selected asset manager, there were more Growth funds that added to their positions in nine months out of 12 following April 2020, and for all 12 months out of 12 following December 2008. On the other hand, Value funds took a more conservative approach in recovering their positions which was seen, in general, by more funds decreasing their positions in the 12 months following April 2020 and December 2008.



Market Segments

Next, we look at how different investment styles determine the industries in which funds invest. Even during times of recession, certain industries such as Consumer Non-Cyclicals, Healthcare, and Utilities are perceived to be less susceptible to market movements. Market segments such as Finance and Technology, on the other hand, are more volatile investments during a downturn.

Through our analysis, we observed that Growth funds within our selected asset manager significantly increased their MoM positions in the Consumer Cyclicals and Consumer Non-Cyclicals sectors in and around April 2020. At the same time, we saw a surprising decrease in the Business Services and Healthcare sectors by the same group of Growth funds. This trend is most likely due to the introduction of lockdowns around the globe.

The diagram below illustrates how the different sectors compare to each other based on MoM position changes.


For comparison across investment styles, we then considered how some of the above-mentioned sectors were trending with respect to Value funds. In particular, the Business Services and Healthcare sectors were in sharp contrast to the investment pattern demonstrated by Growth funds. Both these sectors saw large increases in MoM positions for Value funds. One possible reason for this is that Healthcare was perceived to be less susceptible to the impact of COVID-19; therefore, the more conservative Value funds invested in this market segment. The diagram below illustrates how Business Services and Healthcare ranked second and third, respectively, relative to other sectors in May 2020.


With respect to the market segments, the above trends show how different investments styles could potentially impact on which sectors an asset manager may place greater emphasis.


  1. Our analysis shows that most funds for the selected asset manager, regardless of their investment style, tend to sell when the market crashes. However, Growth funds tend to be more aggressive in re-establishing their positions after the event. Depending on an investor’s risk appetite, this has several implications when choosing an asset manager or fund.
  2. Funds of different investment styles, but issued by the same asset manager, may trade different sectors. For example, Growth funds were generally selling Business Services and Healthcare stocks in April/May 2020 while Value funds were buying in the same sectors during the same period. Therefore, investors of funds of different styles issued by the same asset manager could potentially be buying and selling the same securities while incurring transaction fees.

There are several avenues to expand upon this analysis. One possibility is to analyze whether funds that are of the same investment style but issued by different asset managers trade in different sectors. Additionally, to ascertain related investment patterns and behaviors, it is possible to perform a similar analysis for other time periods or using other variables in addition to investment styles and market segments.

Kikai Kobayashi and Aalok Chhabria also contributed to this article.

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.


Matias Park, CFA

Senior Implementation Specialist, Content and Technology Solutions

Mr. Matias Park is a Senior Implementation Specialist within the Content and Technology Solutions group at FactSet. He joined FactSet in 2013 as a consultant covering the South Korean market. In his current role, he works closely with clients and prospects from South Korea and Australia. Mr. Park earned a bachelor’s degree in business administration from the Universidad de San Andres, Argentina and is a CFA charterholder.