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Fund Buyer - 2023 fund review: Tech hot, China not. What lies in store for 2024?

Date: 12 January 2024

8 minute read

Today on the Fund Buyer we are going to be looking back at what the market environment last year meant for the world of funds, the winners and losers and tentatively think about what this year might bring.

2022 was fairly painful, so fund and investment trust investors will be pleased to see a much improved 2023 swiftly following it. While the path to these returns was not exactly a straightforward one, the drivers of previous stellar performance in 2020 returned to the top of the performance tables, giving a sense of familiarity to beaten up investors. Indeed, 2023 saw a distinct sense of clarity at both ends of the table, highlighting the places it very much paid to be invested in, as well as the areas best avoided. It also should remind us all of the age old investing fact – it pays to retain a balanced portfolio because the short term drivers of markets are very hard to predict.

Looking at funds within the Investment Association’s universe, it is clear technology stocks are very much back in vogue, despite the high interest rates that were supposedly going to hamper them. The ‘Magnificent Seven’ stocks have brought tech funds back to the fore, with the top 10 performers almost exclusively focused on that sector. After a difficult few years, it is perhaps fitting that top spot goes to a fund managed by Cathy Wood, founder of ARK, a firm synonymous with tech investing in the US as Scottish Mortgage is in the UK. Clearly the artificial intelligence boom of 2023 helped to drive these funds up from the doldrums they found themselves in at the beginning of last year and rewarded investors who stayed patient and invested through the difficult period. The dominance from the tech sector meant that other markets that performed well did not really get much of a look in, with only one non-technology dominated fund, the Lazard Japanese Strategic Equity fund, cracking the top 20 best performers last year.

At the other end of the spectrum, just as tech has been shooting the lights out, China has been left languishing at the bottom in a year when its Covid reopening was expected to produce attractive returns. abrdn China A Share Equity found itself at the bottom of the performance rankings, although given 42 of the bottom 43 are China funds, it is clear the country as a whole faced considerable headwinds. There is a certain amount of irony in this result given at the start of 2023, China was perhaps the consensus trade – how things changed! With China’s economic issues continuing to persist, it is unlikely we will see a revival akin to the tech funds, but there are hopes the worst is behind us and the country becomes somewhat more attractive in 2024 to investors.

10 best performing funds in IA universe 2023


Total return (%) in GBP

Nikko AM ARK Disruptive Innovation


Liontrust Global Technology


T. Rowe Price Global Technology Equity


L&G Global Technology Index


New Capital US Growth


Pictet Robotics


Polar Capital Global Technology


Pictet Digital


JSS Sustainable Equity Tech Disruptors


PGIM Jennison US Growth


10 worst performing funds in IA universe 2023

abrdn China A Share Equity


Wellington All-China Focus Equity


JPM China


FSSA All China


Value Partners China A Shares Equity


Allianz China A-Shares Equity


Redwheel China Equity


abrdn All China Sustainable Equity


Barings China A Share


Templeton China


Source: Morningstar, Quilter Cheviot, as at 31/12/2022

Turning to the investment trust space, the story of 2023 in many ways was the widening of discounts for many.

This particularly hit many of the alternative income trusts which, while previously standing on premiums, were impacted most by interest rate raises. Within the top 10 biggest fallers, we see plenty of alternative income trusts whose price returns have been weak, including those within infrastructure, and various renewables. Like the open-ended fund space, China also features, although the universe is fairly small. Meanwhile, it continued to be a painful time for some private equity trusts with many seeing the value of their portfolios hampered by rising interest rates.

The worst of the rate rises does now seem to be behind us and market participants are chomping at the bit for rate cuts to be initiated as global growth slows. When this time comes, it would be no surprise to see a quick reversal in fortunes for some of these alternative trusts who rely so heavily on the sentiment of the market and its belief that interest rates have peaked.

While much has been made of the difficulties facing the investment trust sector last year, it wasn’t all bad news. As is often the case, some of the more esoteric areas had their time in the sun, with airline leasing trust Doric Nimrod Air Two, delivering a second consecutive year of outstanding returns. Furthermore, 3i Group led the field, proving that a quality portfolio can help overcome some of the challenges that have faced the private equity market in recent times.

Outside of these more niche areas, the investment trust space saw a more broadly spread return profile. Representation from Japanese, Indian and wider emerging markets sat alongside more obvious winners such as the two technology focused trusts run by Polar Capital and Allianz. Furthermore, just outside the top 10 we even had UK equity representation from Aurora, the concentrated UK focused trust run by Gary Channon. The UK market has been truly beaten up in recent years, but again we may have reached a point of peak pessimism in this regard and brighter times may lie ahead.


Ten best performing investment trusts 2023


Price Total return 2023 (%)

3i Group


Manchester & London


Polar Capital Technology


Doric Nimrod Air Two


Fondul Proprietatea GDR


Allianz Technology


Nippon Active Value


Georgia Capital


India Capital Growth


Amedeo Air Four Plus


Ten worst performing investment trusts 2023

Digital 9 Infrastructure


Foresight Sustainable Forestry


HydrogenOne Capital Growth


US Solar Fund


JPMorgan China Growth & Income


Ecofin US Renewables Infrastructure




Regional REIT


Phoenix Spree Deutschland


Harmony Energy Income


Source: Numis, Quilter Cheviot, as at 31/12/2022

So what of 2024?

There are plenty of predictions about the market floating round, so rather than follow suit with another set for you, I’m going to offer three areas I think we will be hearing a lot more about this year in the fund industry - and one cast iron certainty.

The first is that 2024 may be the year that active ETFs finally start to make their mark in Europe in the way that they have taken off in the US. There is a very obvious reason they have been more popular in the US so far – tax. This is a big advantage to holding an active ETF versus a fund in the US, and although it simply doesn’t apply here, I still think there is enough interest and impetus to begin to launch in Europe. Perhaps the biggest catalyst recently has been Cathy Wood taking a stake in Rize ETF, Cathy being one of the leading lights in the active ETF industry in the states. That topic is one for another day and another Fund Buyer.

My second prediction is that emerging markets ex China funds will be the source of a significant number of new launches. Our recent Asia trip was a good example of how much interest there is, with pretty much every asset manager that is able to run such a product asking us our views. Personally, I wonder if, by the time these have flooded the market and track records built, we might not have become more positive on China, but let’s see!

My final prediction is a little more market related. Might 2024 be the year that small and mid-caps make a resurgence, and with it active management might have a better time? To be fair, the latter point is something we have expected for some time and it has failed to materialise. There continues to be plenty of best of breed managers that are able to outperform with reasonable consistency but the average manager has done poorly.

And finally, the only prediction which is absolutely guaranteed to come true – there will be events that we aren’t even talking about which will come to dominate the market this year. Lets hope that these are on the more positive side as recent years have felt like a series of negative shocks, but without doubt there will be surprises along the way.


This is a marketing communication and is not independent investment research. Financial Instruments referred to are not subject to a prohibition on dealing ahead of the dissemination of marketing communications. Any reference to any securities or instruments is not a personal recommendation and it should not be regarded as a solicitation or an offer to buy or sell any securities or instruments mentioned in it.

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