- The highest growth funds so far in 2023 have come from the Investment Association Technology & Technology Innovation sector.
- The highest growth sector of 2022 was the Investment Association Commodity & Natural Resources sector. Since the start of 2023 this sector has been among the worst performers averaging -5.73%,
- The Baillie Gifford American fund ranked in the bottom 2% of the 3,962 funds that are classified within Investment Association sectors for performance in 2022. But between 30th December 2022 and 15th June 2023 it has been one of the top performers.
In 2022, almost all core sectors experienced sizeable declines in values. But the outbreak of war in Ukraine and the subsequent energy crisis resulted in positive growth opportunities for a small number of sectors such as Commodity/Natural Resources (which is heavily weighted in energy companies). As a consequence, a significant number of investors switched strategies to target these sectors as well as increase exposure to value oriented stocks. But was this a mistake driven by short term thinking?
Since the start of 2023, many investment sectors have seen a welcome return to positive growth and in this article we analyse a total of 1,252 funds across 7 core equity sectors and feature 5 funds from each sector that have been among the top performers since the start of the year.
As identified below, some of the top performing sectors of 2023 so far are the very sectors investors moved away from last year.
After a highly volatile 2022, many investors chose to dump growth stocks in favour of less volatile and more stable value-oriented funds. This was driven by concerns surrounding overvaluation and a perceived downward trajectory of technology funds in particular. But the landscape is rapidly changing and recent data shows that the funds and sectors dumped by many investors last year are now among the top performers of 2023.
Top Performing Funds of 2023 - Commodity & Natural Resources
In 2022, the top performing sector was the IA Commodity & Natural Resources sector with average returns of 22.74% for the year. The Commodities & Natural Resource sector includes funds whose primary holdings are in energy such as oil and natural gas, which attracted significant interest in 2022 particularly due to the huge rise in energy prices. But with a history of excessive volatility, and as energy prices seem to have already reached their peak, has this sector's strong period of growth come to an end?
In the table above we detail the 1, 3 & 5 year performance and sector ranking for 5 funds from the Commodity & Natural Resources sector that have performed the best in the sector since the start of 2023.
In the graph below we show the performance of each of the 5 featured funds within the Commodity & Natural Resources sector during the period between 30th December 2022 and 15th June 2023.
In the graph above we show the performance of each of the 5 featured funds within the Commodity & Natural Resources sector during the period between 30th December 2022 and 15th June 2023. These 5 funds represent the top performers in the sector over this period. However, as the majority of funds within this sector have experienced negative growth this year, the sector average for 2023 to date has been -5.73%, making it one of the worst performing sectors for the period.
Top Performing Funds of 2023 - Global
Global funds invest in a wide range of stocks across world markets, with this broad focus potentially helping to minimise the impact of stock market shocks on a portfolio. For example, if one region or sector suffers a knock, hopefully gains elsewhere will help offset these losses. In 2022, the 487 funds classified within the Global sector averaged returns of just 1.73% for the year. Although this is disappointing, it is important to note that in the first 9 months of 2022 the sector had averaged negative returns of -8.77%, with a strong end to the year the only reason the sector finished in positive territory.
Since the turn of the new year the Global sector has enjoyed a much more positive period of growth with the sector averaging 6.49% from 30th December 2022 - 15th June 2023.
The above chart shows exceptionally strong performance from 5 of the top performing funds within the Global sector this year to date, with the MS INVF Global Opportunity fund having the highest growth returns in the sector.
Over the past 1, 3 & 5 years these 5 funds have enjoyed differing degrees of success, particularly over 5 years with the Baillie Gifford Long Term Global Growth fund and Guinness Global Innovators fund the only 2 to have returned top quartile sector performance over both 1 and 5 year periods.
Top Performing Funds of 2023 - North America
The North American equity sector is an important asset class that is likely to form an integral part of many mid to higher risk investment portfolios.
The North America sector is one of the most competitive on the market, with 225 funds currently classified within the sector. Like so many others, the sector experienced a tough 2022 but it has had a much more positive period this year to date.
The 5 funds in the above graph are among the 5 top performing funds in the North American sector between 30th December 2022 and 15th June 2023. The graph also shows the sharp rise in performance of the Baillie Gifford American fund which was in the bottom 2% of the 3,962 funds that are classified within Investment Association sectors for performance in 2022.
The 1, 3 & 5 year performance and ranking table above shows that 2 of the 5 North American funds (Invesco EQQQ Nasdaq 100 UCITS ETF & Ninety One American Franchise fund) have also managed to outperform at least 95% of the funds in the sector over 5 years.
Top Performing Funds of 2023 - Technology & Technology Innovation
In the midst of a highly volatile 2022, many investors chose to dump technology stocks in favour of less volatile and more stable value-oriented funds. This was driven by concerns surrounding overvaluation and a perceived downward trajectory of technology funds.
But over the past several months, the technology sector has bounced back and the sector has averaged the highest growth among all 56 investment association sectors this year to date.
The 5 funds above have enjoyed exceptional growth this year with the sector in general averaging huge gains of 25.58%. The top performing fund in the Technology & Technology Innovation sector this year has been the Liontrust Global Technology fund with growth of 42.95%. This fund invests in high quality growth stocks designed to future proof a portfolio based on 5 technology themes of digital payments, e-commerce, next generation software tools, cloud/digital infrastructure and immersive entertainment.
Over 1, 3 & 5 years 2 funds stand out for exceptional performance and consistency - the L&G Global Technology Index Trust and the iShares S&P 500 Information Technology Sector ETF. Both of these funds have experienced some of the harshest market conditions over the past 5 years yet they both have consistently delivered the highest returns in the sector.
Top Performing Funds of 2023 - IA UK All Companies
There are currently 239 funds UK Equity funds classified within the highly competitive UK All Companies sector. There can be a wide variance in performance across the range of funds in the sector but there is no shortage of quality, top performing funds to choose from. In 2022, the sector finished the year in negative territory with average returns of -1.22%. This average has improved so far in 2023 to 3.89% but as identified below a selection of these funds have performed well above this average.
Each of the 5 funds featured UK All Companies funds are among the top performing funds in the sector this year, with the Liontrust UK Focus fund topping the list with 15.33% growth in the period between 30th December 2022 and 15th June 2023.
Of the 5 UK Equity funds that have the strongest performance this year only the Artemis UK Select fund has managed to rank in the top quartile of the sector for performance over the past 1, 3 & 5 years.
Top Performing Funds of 2023 - Europe ex UK Equity
Europe is one of the most diverse, rich and complex equity markets in the world. With different cultures, political systems and economic profiles it can offer attractive investment opportunities for investors.
There are around 50 countries in Europe and 28 EU member states, so this sector remit can be quite wide. Funds may invest in companies of all sizes within these diverse economies.
2022 was a year of high volatility across Europe and the above graph shows this remains, with sharp fluctuating spikes in performance for the Europe ex UK Equity sector so far this year.
The top performing fund in the Europe ex UK Equity sector this year has been the Allianz Continental European fund. The fund currently manages a modest £230 million of investor assets and its performance over the past year in particular has been highly competitive. However, as identified in the table below, the BlackRock European Dynamic has been the only European fund featured that has continuously outperformed at least 75% of its sector peers over the past 1, 3 & 5 years.
Top Performing Funds of 2023 - Asia Pacific ex Japan
The Asia ex-Japan sector covers the economic region of countries located in Asia, but not including Japan. These countries are generally considered emerging markets and are typically only suited to investors looking for high-growth investment opportunities who have a higher risk tolerance.
The sector itself was one of the hardest hit in the first half of 2022 but it slowly recovered to end the year at averaging growth of 3.57%. At the start of the year, the sector enjoyed a strong rally but this has dropped back after highs of February and for the year to date the sector has averaged a disappointing -0.09%.
The graph above shows just how volatile the sector remains with Asian markets in particular struggling to recover from the sustained high volatility of 2022.
All 5 of the top performing funds in the Asia Pacific ex Japan sector this year have maintained a level of performance over the past 1, 3 & 5 years that was better than the majority of the funds in the sector. Notably, 2 of the top funds in the sector are from Invesco which is unsurprising as they are one of the few fund management companies who have a specialist management team based in Asia.
Maximising Growth & Recovery By Investing In Proven Quality
The funds featured in this report represent some of the top performing funds in their sectors over a short time frame. As such, their performance may not sustain a high level of competitiveness in the mid to long term when market stability returns.
Although these funds have been among the top performers so far this year, how they perform going forward is not guaranteed. However, our research shows that the funds with a consistent history of outperformance are more likely to continue to outperform compared to the funds and fund managers who have a more chequered performance history.
Balance Is Key
In the pursuit of growth, it can be easy for investors to become over-reliant on the success of one asset class and thus load the weighting of their portfolio in funds in sectors that have performed well. But the risk of doing so can be painfully evident should that sector take a slump.
The sectors featured in this report are among the most heavily utilised in the industry and they each host a range of region specific investment options that can add both value and balance to a portfolio through a strategic asset allocation model.
As no single equity style, sector, country or region outperforms all others all of the time. Global diversification spreads risk amongst countries and currencies to offset the risk of investing in just one region or country. As such, globally-diversified portfolios are vital to long-term investment success.
Being able to spread your risk across various countries shields investors from country-specific conflicts and regulations. In this way, if one country struggles economically due to regional issues, your portfolio will feel that it affects less.
Get Quality Investment Advice
While the key factors for good investment advice can add value to any investment portfolio there are a number of additional factors that most advisers don't utilise, factors that can add even more value to investors.
Although financial advisers can add sizeable value to investors over the course of their investment horizon, only a relatively small proportion have a high level knowledge of fund and fund manager performance. 2 areas that if measured and used effectively to implement and maintain a top performing portfolio of funds, can add significant additional value.
Such advisers are able to build and manage efficient portfolios suitable to their clients’ risk profile and overall objectives. But like any industry, there are those who are good at what they do, and there are those who are not. The main difference in the financial sector is that it is very difficult for a client to know whether their adviser has the expertise until they take the chance and invest with them.
If your portfolio is managed by a financial adviser you want to make sure you are partnered with someone with a research driven knowledge in fund performance. There are financial advisers who demonstrate great expertise and knowledge when it comes to fund selection. However, fund performance is not a regulated aspect of financial planning, and financial advisers are not required to research funds. As a result, a large proportion demonstrate poor knowledge on the quality of funds they recommend.
Quality advice and portfolio management firms understand fund and fund manager performance and are able to use this knowledge to identify the best options and build efficient, top performing portfolios. It is this process that distinguishes the top advice firms from the rest.
Efficiently Managing Your Investments
We believe as investors, growth should be the primary aim and as such our strategies are built upon using quality funds and fund managers who have a proven history of outperforming the markets. This unbiased approach allows us to focus only on what really matters, to think independently and to maintain a long-term perspective.
It is this quality driven approach that we believe will yield the best investor outcomes in the medium to long term. There are many pitfalls to investing but this article details the core topics that if effectively managed will add value to any portfolio.
At Yodelar Investments we implement efficient processes to ensure all of our portfolios follow best practices for all topics featured in this article.
The development of our portfolios comes from years of research and analysis that included the consistent assessment of more than 100 fund managers, tens of thousands of funds and more than 30,000 investment portfolios. Our research identified that only a small proportion of funds and fund managers have consistently delivered top performance, with more than 90% of the portfolios we reviewed containing funds that continually underdeliver. This research has enabled us to identify efficient processes and top-quality investments which we have utilised to create strategically balanced, risk-rated portfolios that are built using only top quality funds within each asset class and offer investors excellent potential for growth.
Yodelar provides an advice and information service that is changing the way investors think. Book a no obligation call with our team today and find out how we can help you grow your wealth efficiently.
