The longest month of the year is officially over.
That means we get the first look at which funds and markets are doing well in 2024. So far, trends from 2023 are still dominating, with technology taking several of the top spots in our best performing funds of January list.
But it's India strategies that take the top two spots, with Japan following suit.
At the other end of the table we find the usual suspect, China, but these funds are not completely alone in occupying the bottom 10. Last year's best-performing fund has fallen to become the eighth-worst performer in January, and we also see metals and energy transition feature here.
Overall, just over half of the 3200 funds in our dataset (Morningstar rated and available for sale in the UK) are down since 2023. The worst performer was down 18% in January and 27 funds saw double-digit losses. Meanwhile, the best-performing fund was up almost 9%.
Commenting, Ben Yearsley, director at Fairview Investing Limited, says:
"The positive equity stories of 2023 all continue with tech, India, and Japan all starting 2024 with a bang," he says.
Two of those areas look pretty expensive – but then again they almost always do. Japan remains one of the most interesting stories, with corporate change and more shareholder awareness helping drive markets. On the other side, China can't seem to escape the doom loop; Beijing need a big bang to pull markets from historic lows".
India, Japan and Tech's Win Big
The top two performers of January 2024 were Jupiter's India and India Select funds, both with over 8% growth. But, despite the Indian Nifty Fifty index hitting record highs, they were the only two India-focused strategies in the top 10, and two of only three in the top 50.
Technology and global and US large cap growth were by far more prevalent in the top 50 as the focus on AI continued to drive US equity success. The markets also expect the US Federal Reserve to cut rates this year, fuelling further growth. The best performing of these funds was Janus Henderson Global Technology Leaders, up 7.9% in January.
The two Japan funds featured in the January top 10 are Liontrust Japan Equity and Scottish Widows Japan Growth, up 7% and 6%, respectively. The Japanese TOPIX was up almost 7% over the month, and the country remains the last in the world where the central bank maintains negative interest rates.
Joe Bauernfreund, chief executive, chief investment officer, and manager of AVI Japan Opportunity Trust, explains the country could still have many good years ahead. Companies are prioritising shareholders, business practices are changing and the macroeconomic backdrop is supportive.
"We believe inefficiently-priced Japanese small cap companies offer the greatest potential returns, and with the effectiveness of shareholder activism having never been higher, active management offers significant alpha generation," he says.
China Loses Out, 2023 Winner Falls
Meanwhile, China remains at the bottom after being the worst-performing fund category in all of 2023. This month, property giant Evergrande was forced to liquidate after spending two years on the brink of defaulting on its debt pile. Redwheel China Equity, which featured in the bottom 10 for 2023 too, saw the biggest losses at 18%.
Another notable fund among these is Baillie Gifford China, the fourth-worst performer – the Edinburgh fund house announced that as of January 31, it is forming a dedicated China equities team consisting of 10 people. In its announcement, Baillie Gifford said having a single dedicated team will help "align motivation, incentives and accountability, while strengthening the ties between Shanghai and Edinburgh, to leverage global and local perspectives".
Beyond China, the bottom 10 includes WS Amati Strategic Metals, Schroder Glbl Engy Transition, and last year's best-performing fund: Nikko AM ARK Disruptive Innovation. The latter, which is advised by Cathie Wood’s ARK Investment Management, was up 59% in 2023, but has fallen 12% so far this year.
