Fund Focus: meet the ‘winners’ of the tech sell-off

It’s times like that these that test investors’ nerves. 

Tech shares have broadly sold off since October and it’s not looking pretty for some of the funds and regions that had previously commanded some strong returns.  

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The tech-heavy Nasdaq Composite lost around 11% in sterling terms between the start of October and 9 November, and things have also looked hairy for the emerging markets and Japan, plus the funds and shares most associated with the artificial intelligence (AI) trade.

Source: FE. Past performance is not a guide to future performance.

If you hold an AI fund, a tech fund or one focused in places like Korea or Taiwan, it has been an especially painful few weeks. 

But times like this give us the opportunity to ask what actually has served its purpose as a diversifier. And for now, there are some glimmers of hope. 

Back to boring 

In June, I argued that the “boring” sectors not associated with the AI trade might warrant some attention, and pointed to the UK, India, Europe and niche funds like Polar Capital Global Ins F Acc (B61MW55) as some options. 

And a few of these have certainly fared well in the recent few weeks of turmoil. 

India has done well, with the Investment Association’s India/Indian Subcontinent sector up by around 7%. 

One standout name, JPMorgan India Growth & Income plc (LSE:JIGI) investment trust, has returned almost 12% in that period. 

As our table shows, UK equities have also done well – although definitely not avoiding bouts of weakness. 

One especially beaten-up name has stood out here: Finsbury Growth & Income Ord (LSE:FGT) has returned 15%, making it the best-performing equity fund outright over that period. 

This relates in part to the recovery of software and data-focused companies seen earlier as AI victims, from London Stock Exchange Group (LSE:LSEG) to Sage Group (The) (LSE:SGE).  

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We could keep getting a dynamic where these “victims” struggle as and when the AI trade weakens, although they may suffer again if the AI trade regains some of its momentum.

We did recently interview FGT manager Nick Train, and the two videos covering the trust’s recent performance and his views on the UK market will be online on your YouTube channel later this week. 

Meanwhile, some other “boring” names are back, for now. 

Sectors seen as defensive such as consumer staples, healthcare and infrastructure (shares) have performed well, with exchange-traded funds (ETFs) focused on these sectors doing well, plus names like Lazard Glbl Lstd Infras Eq A Acc GBP (B5NXD34). 

Such sectors often fall within the remit of investors with a quality growth investment style, such as Train. 

And other funds with such a focus have also performed well: think IFSL Evenlode Global Equity B GBP Acc (BMFX289), IFSL Evenlode Global Income B GBP Inc (BF1QNC4) and the UK income fund run by the same team, which often ends up having some shared holdings with Train. 

Meanwhile, the Polar Capital Global Insurance fund, which had an underwhelming 2025 but comes with a decent track record as a diversifier against global markets, has had a strong showing. 

Finally, it’s worth noting that one of the best-known diversifiers has clawed back a little credibility after a trying times. 

Government bonds have seen their yields fall, with prices rising correspondingly. 

As per returns from IA sectors, the average UK index-linked gilt fund has made a positive return of 3% in our period of analysis.  

The average regular gilt fund is up by slightly less, while funds focused on government bonds and more defensive corporate bonds (investment grade) have tended to make small positive returns. 

So, it’s encouraging to see that diversification is working, to an extent. 

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But any sustained sell-off might demand even more grit from investors. 

If we look at equity markets, a proper bear market would likely drag all regions down in the long run.  

But the sectors less associated with AI might suffer less, and give you a greater chance of at least seeing something in your portfolio performing well. 

The contrarians among you may well have been weighing up the idea of buying into beaten-up tech shares and the funds that back them.  

That’s certainly a worthy consideration, but sell-offs like these also highlight the ways in which your portfolio might be better diversified. 

Such warnings can be worth listening to.