Interactive Investor

The best and worst-performing funds of 2023

There were two big winning and losing themes for funds in 2023, writes Sam Benstead.

19th December 2023 14:44

by Sam Benstead from interactive investor

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Gears labelled best and worst 600

Taking stock of the best and worst open-ended funds in 2023 reveals some interesting trends that would have surprised many forecasters at the start of the year.

Expectations were for a recession and expensive shares to underperform cheap ones, due to falls in profits linked to rising interest rates and weaker economic growth.

However, the best funds of the year were clustered around technology as a theme, and the worst nearly all invested in China, which was tipped by many as a winning sector at the start of the year due to a predicted economic rebound following restrictions linked to the pandemic.

Below we run through the 20 best and worst open-ended funds of the year. The total return data in sterling, to 13 December, was sourced by FE Analytics.

Best funds: technology dominates

Of the 20 best open-ended funds year-to-date, 11 had a technology theme.

Tech shares were in the spotlight due to developments in artificial intelligence (AI). Kick-started by OpenAI’s launch of ChatGPT just over a year ago, which uses “generative AI” to answer questions, help with computer programming, and even solve maths problems, investors became very excited about companies building AI software, such as Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT).

AI also demands lots of computer-processing power, so computer-chip companies, such as NVIDIA Corp (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD), have also risen in value this year as their profits have increased due to the “arms race” for advanced computer chips.

The top funds in 2023 included one tracker: L&G Global Technology Index Trust (up 50.2%) which costs just 0.32% a year to own and has around 18% invested each in Microsoft and Apple Inc (NASDAQ:AAPL).

Only one active fund beat it: T. Rowe Price Global Technology Equity, which rose 51.6%. Its largest positions are in Nvidia, Apple and Microsoft. It charges a relatively expensive 1.02% a year in fees.

Other active funds investing in the tech sector that have made a splash this year include Liontrust Global Technology (up 49.5%), Pictet Digital (up 42.6%) and Polar Capital Global Technology (up 41.3%).

Cathie Wood’s ARK Innovation fund was a top performer as well. UK-based investors can access her strategy in open-ended form via the Nikko AM ARK Disruptive Innovation fund, which rose 49.2% in 2023, but could soon have access to an exchange-traded fund (ETF) version as her firm, ARK Invest, has purchased a UK-based ETF provider, Rize ETF.

Outside specialist technology funds, US equity strategies stood out, largely because they owned similar shares that would have appeared in tech-only strategies.

They include PGIM Jennison US Growth (up 44.3%), MS INVF Global Opportunity (up 42.2%) and Natixis Loomis Sayles U.S. Equity Leaders (up 38.7%).

Two other themes emerged among the top 20 funds. The strong year for Japanese shares meant that Nomura Japan Strategic Value ID Hedged just made the list with a 38.3% gain, and Fiera Capital Europe Magna Eastern European, which bounced back after a difficult 2022 after it moved its assets out of Russia and into Poland and Greece, rose 36.2%.

Top fundsTotal return 1 Jan to 13 December (%)
T. Rowe Price Global Technology Equity 51.6
L&G Global Technology Index Trust 50.2
Liontrust Global Technology49.5
Nikko AM ARK Disruptive Innovation49.2
PGIM Jennison US Growth 44.3
SVS The Jake43.2
Pictet Digital42.6
MS INVF Global Opportunity 42.3
JSS Sustainable Equity Tech Disruptors42.2
Polar Capital Global Technology41.3
T. Rowe Price US Blue Chip Equity 40.6
Pictet Robotics40.0
T. Rowe Price US Large Cap Growth Equity Fund39.5
New Capital US Growth 39.3
Natixis Loomis Sayles U.S. Equity Leaders 38.7
Janus Henderson Global Technology Leaders 38.4
Nomura Japan Strategic Value ID Hedged 38.3
T. Rowe Price US Large Cap Growth Equity 37.9
Fiera Capital Europe Magna Eastern European 36.2
FTGF ClearBridge US Large Cap Growth 35.1

Source: FE Analytics. Past performance is no guide to future performance.

Worst funds: China takes the wooden spoon

Among the losing funds, the theme was even clearer than among the winners, with China funds making up 17 of the 20 worst performers.

This year, China has battled deflation, a slowing economy, issues in its property sector, pessimism around its ageing population, and political interference in private companies.

Moreover, Indian shares performed strongly, which likely attracted capital destined for emerging market companies away from China.

The biggest fund loser in the sector was abrdn China A Share Equity, which dropped 30.1%, followed by NB China Equity Institutional (down 29%) and JPM China (down 28.9%).

Popular China funds that also delivered poor returns this year included Baillie Gifford China (down 24.7%), Allianz China A-Shares (down 27.6%) and Templeton China (down 26.6%).

But the worst fund of the year did not invest in China. It was the Active Niche Luxembourg Selection Fund Active Solar, which invests in listed solar energy companies.

Renewable energy has had a tough year as interest rates rose, decreasing the appeal of companies that do not make a lot of money today. Moreover, renewable energy that generates a steady income by selling power to the grid became less appealing as bond yields rose, giving income investors more alternatives.

Finally, LF Equity Income, the former Woodford Equity Income fund, made the list, with a 33.8% loss. The strategy is being wound up and capital returned to investors, with tough-to-sell unlisted assets the last to be liquidated this year.

Investors in the Woodford fund accepted a compensation deal last week of £230 million, which taken together with the final capital payments set to be returned soon to investors, means that investors will receive around 80% of the value of their fund holding when the £3.6 billion strategy suspended in June 2019.

Another losing strategy was WS Amati Strategic Metals, which dropped 27.5%. The fund invests in mining companies that are involved in “strategic” commodities, which it defines as those that are critical to a transition to clean, sustainable energy sources and a lower-carbon world.

However, as commodity prices fell in 2023, mining companies fell in value.

Bottom fundsTotal return 1 Jan to 13 December (%)
Active Niche Luxembourg Selection Fund Active Solar -34.0
LF Equity Income -33.8
abrdn China A Share Equity -30.1
NB China Equity Inst -29.0
JPM China -28.9
FSSA All China -28.4
Wellington All-China Focus Equity -27.8
Allianz China A-Shares -27.6
Value Partners China A Shares Equity-27.6
WS Amati Strategic Metals -27.5
Allianz China A-Shares Equity -27.4
abrdn SICAV I All China Sustainable Equity -27.3
Barings China A-Share -26.7
Templeton China -26.6
Matthews China Dividend-26.2
Redwheel China Equity -26.0
Matthews China -25.7
Baillie Gifford China -24.7
Allianz All China Equity RT-24.7
GS All China Equity Portfolio-24.4

Source: FE Analytics. Past performance is no guide to future performance.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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