We've updated this article to cover the whole year's performance data for UK based funds
If there’s one winner this year, it’s the Nasdaq – and the funds investing in the tech-focused index.
It’s now July, meaning it’s time for a roundup of the first six months of the year for all the Morningstar-rated funds available for sale in the UK. Two-thirds of the 3,231 funds in our dataset can breathe a sigh of relief as they’ve managed to post a positive return.
Let’s start with the winners over 2023 so far. The technology sector drove the returns for a large chunk of the top performers: while half of the top 10 list are sector funds with technology focus, US large-cap growth is dominated by technology stocks by default.
The returns have been good, too. The hype around generative AI seems to have unleashed a share price craze, and every fund in the top 10 has returned at least 27%.
This growth comes after a dire year for anyone invested in tech. In fact, all the funds in the top 10 were among the worst performers overall in their own respective categories. Nikko AM ARK Disruptive Innovation (the only US flex-cap fund in the list) was down 62% in 2022 and the worst performer in its category. A 35% gain so far in 2023 must be a welcome figure for investors.
The best performer so far this year is Liontrust Global Technology with 39.86%, while the biggest fund in the top 10 is the £4 billion Polar Capital Global Tech (which returned 28.71%).
Ben Yearsley, director of Shore Financial Planning points out that it’s been an action-packed six month for markets: “Starting with Apple being a $3 trillion company now, a figure unimaginable a decade ago, but trillion-dollar companies are commonplace now! Apple up almost 50% so far in 2023 so unsurprising that Nasdaq has performed so well rising 5% over the last month and 30% over six months."
He adds that normally, it’s hard for tech funds to outperform the Nasdaq when it goes on a charge, especially because they have a ceiling on their holdings: “With Apple and Microsoft both over 10% of the index, active funds struggle to compete.”
However, the top five funds did manage to outperform the Nasdaq’s 32% growth.
If there’s a top 10, there must be a bottom 10 too. So far this year, this list is filled with funds with a China focus. In fact, China funds are not just occupying 10 spots, but 43 of the bottom 50. The returns hover between negative 16-20%.
Kristina Hooper, chief global market strategist at Invesco, points out that China is in a markedly different place in its cycle, having relaxed Covid-restrictions only this year.
“The reopening is largely benefiting the services component of the economy while slowing growth momentum globally has meant weaker-than-hoped manufacturing activity,” she says – but argues that the near-term outlook remains favourable.
“Growth should accelerate in the second half of 2023, inflation is well-anchored and monetary policy remains accommodative. Policymakers may soon set policies to reinvigorate the property market and counter demographic headwinds.”
Redwheel China Equity fell 20.15% in the first half of the year, making it the fund with the biggest losses in 2023 so far. But, the fund had the best return among these funds in June (at 2.44%).
Besides this, one UK small-cap equity fund made the bottom 10, too: TM Stonehage Fleming Opportunities, which dropped 18%.
June’s Best and Worst Performers
The review wouldn’t be complete without a look at last month’s figures. It’s South America that’s done well over this period; the podium is packed with Brazil funds, with returns between 11-12%; and another three Latin American funds are found in the top 10.
For this iteration we’ve shortened the list to the top five. Joining HSBC, JP Morgan and BNY Mellon’s Brazil funds are two funds from Fisher Investments, focusing on US small caps and US small-mid caps. Both these have returned around 10% in July.
Three categories stand out at the bottom: macro trading, precious metals and infrastructure, and they are repeated throughout both the bottom five and 10. The worst performer, the £1 billion JP Morgan Global Macro Opportunities, was down 7.16% last month (and down 0.12% this year).
Several bond funds performed just well enough to elude the bottom performer lists this month, despite poor performance from US government bonds. This, according to Yearsley, was due to a mix of rising yields and a strong performance of the pound versus the dollar. In our lists, we also see some China bond funds feature in the bottom 20.
Yearsley also notes that Brook Absolute Return, part of the Odey Asset Management stable, was also in the 10 worst performing funds, although this fund does not feature in our dataset as it does not have an analyst rating. The fund is currently gated, which you can read more about in our coverage.
