We’ve officially made it through the toughest month of the year, and there is some good news for growth investors. After a year of disastrous returns, US large-caps and technology is back, sporting double digit growth.
Overall, most funds ended January in positive territory. Of the 800 rated funds in our dataset, almost 750 have seen their assets grow, and 19 of these were in the double digits.
Among these, a few categories stand out: US and global large cap growth, technology, and Chinese equities.
Many of the funds that are now in the top 10 were in the bottom last year – both within their categories and overall. Funds with a focus on Indian equities dominate, accounting for 6 of the 10 funds in the bottom.
This is a clear shift in trends from what we have seen over the past year.
If you look at the best-performing fund in January you see just how big a shift this is. MS INVF US Growth is up 12.97%, and will be familiar to you if you follow our monthly updates. This fund was 2022's worst performer, where it lost 55.98%. But readers with an even longer memory will recall the Bronze-rated fund was the best performer in 2020, with a staggering gain of 110%.
This is not the only fund making a reappearance at the other end of the table. Six funds in total are now in the top performers list: the T. Rowe Price funds, the two Baillie Gifford entries, and Morgan Stanley’s Advantage fund.
It’s worth noting that this data encompasses January. Hence, it shows market sentiment before yesterday’s smaller rate hike by the Fed, which sent US stocks even higher.
Other funds that did well include Fidelity Italy and Magallanes' European Equity. As my colleague Antje Schiffler has said, European stock markets have got off to an upbeat start, and the Stoxx 600 even posted the best total return by year since the index began in 1987.
However, some experts believe this optimism is premature. In an interview, Alliance GI’s head of macro unconstrained Mike Riddell explainswe still haven’t seen the full effects of the rate hikes across the world.
We also have Chinese equities represented with Schroder ISF China Opportunities. The strategy is up 11.01%, showing just how impactful the optimism around the end of Covid-19 restrictions has been.
As expected, if what’s down comes up, what goes up must come down. Some of last year’s winners are struggling at the bottom and finding it hard to repeat their success.
Aspect Core UCITS was the second-best performer in 2022 when it returned 43.98%. It is, however, the worst performer so far this year, down 5.62%. Another familiar face is Tm Fulcrum Dcar Usd Hedged, which is down 2.54%. It returned over 20% in 2022.
Overall, India funds feature most heavily at the bottom. Ben Yearsley, director at Shore Financial Planning, attributes this to a recent budget announcement and controversy surrounding the Adani Group.
"Sectors, regions and style get written off too quickly," he says.
"China, bonds and tech are all recent examples where many investors decide they are uninvestable only to see strong rebounds shortly after. It still pays to have a diversified portfolio of different styles and asset classes. The traditional 60/40 portfolio was dead and buried last year but the outlook now looks far better – 60/40 has been resuscitated."
If this continues, our next summary of funds going from worst to first (read our latest hero to zero update) will be remarkable.
