November was a good month for the majority of markets. More than 95% of all funds that are rated by Morningstar and available for sale to UK investors returned positive figures over the month, and 60 of them were in the double digits.
Out of about 3,200 funds, over 3,000 funds rose in November, with technology and US stocks were the clear winners. But among the top 60 there were also equity strategies for property, Brazil, Europe, Korea – and one UK small-cap fund.
Ben Yearsley, director at Shore Financial Planning explains:
"The US is leading the pack with growth again surprising on the upside with third quarter annualised figures of 5.2%, revised up from an initial reading of 4.9%.
"The US leading the global economy is helpful as the other powerhouse, China, has seen falling manufacturing PMI numbers below the magic 50 showing contraction is on the cards, but October retail sales soared 7.6% year on year. In Germany, business confidence has picked up albeit from low levels – the German economy shrank 0.1% in the third quarter."
China equity funds occupy the majority of the bottom 50, alongside a few bond funds (due to the strength of the pound) and thematic agriculture and natural resources strategies.
However, it was largely a good month for bonds. As central banks are keeping interest rates fixed and inflation seems to be heading down, European bonds, gilts and US Treasuries are all rallying at the expectation that rates could be coming down next year.
The best overall performer in November was Nikko AM ARK Disruptive Innovation, which has been a fixture in our bottom 10 multiple times this year, including October. It is a European version of Cathie Wood’s famous ARK Innovation ETF (which had a torrid 2022) and is advised by ARK Investment Management. Over November the fund soared 25.18%, bringing the yearly return up to 41.67%. We await the December figures to see whether it will feature in the top funds for 2023.
Also breathing a sigh of relief is Baillie Gifford, one of the asset managers taking the largest hits by the value rotation of the past two years. Its American fund, down 50% in 2022, grew 17.77% in November.
Janus Henderson Horizon Pan-European Property Equities completes the top 3 with a 15.79% gain. It is the only fund with a single-digit return for 2023 in the top 10.
Meanwhile, China is still struggling to get its economic recovery going following the Covid-19 pandemic and an ongoing property debt crisis. In November the worst performing fund, Neuberger Berman China Equities, fell 6.64%. This brings the fund’s overall 2023 return to a negative 24.97%.
As my colleague Kate Lin recently discussed with Morningstar’s associate director for manager research, Bryan Cheung, China funds were hit by $7 billion in outflows over Q3.
In a video interview, he said: "if you look at the forward PE of China equity, they are among the lowest versus the major EM countries, implying a better return potential in the longer term. And for the near term, confidence needs to improve for investor interest to return, which could take some time.
"Nonetheless, the government is still pro-growth to reach its GDP growth target. While much of the negative news is likely in the price, it's always difficult to time the market's inflection point. So, we think investors should try to prepare rather than to predict the broad market movements."
Watch Kate and Bryan’s conversation on whether you should buy the dip here
Three non-China funds also made it onto the bottom 10 list: T. Rowe Price Global Government Bonds, Guinness Global Energy, and T. Rowe Price Funds Dynamic Credit – all with a Morningstar Medalist Rating of Silver.
