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Halfway Through

Date: 11 July 2023

As we pass the halfway point in the year, in today’s Fund Buyer we are looking back at the leaders and laggards so far and expressing some thoughts as we head into the second half. The past six months have been tumultuous from a markets' perspective as rising interest rates, banking crises and geopolitical volatility have taken centre stage. So far, this year has seen a fairly dramatic sea change in the winners and losers from an investment fund perspective too, as asset managers have attempted to navigate a fairly tricky environment.

Nowhere have we seen such a reversal of fortunes as in the tech world, which came back with a bang following a difficult 2022. Ultimately, it has one thing to thank for this U-turn in performance, generative artificial intelligence (AI). Roll back to the end of last year and it is likely very few had heard of ChatGPT, but it has rarely left the headlines since January. This has fuelled some extreme positive share price movements in a subset of technology stocks, not least Nvidia and Microsoft. More broadly, this has resulted in growth indices and funds generally outperforming their value peers, something that seemed unlikely at the start of the year with both interest rates and inflation still rising.

This trend has consequently resulted in some of 2022’s weakest funds becoming some of the strongest so far this year. Funds such as T. Rowe Price Global Technology, Baillie Gifford American and Morgan Stanley Global Insight, which featured in the bottom ten performing funds for 2022, all make the top ten best performers this year – perhaps underlining the need to invest for the long-term.

Another area that has surprised this year is China.

At the beginning of the year, the Bank of America Fund Manager Survey showed a huge amount of bullishness on China due to the reopening from Covid-19 restrictions. But this has very much not materialised in terms of equity returns, with dedicated China funds propping up the bottom of the list of poor performers. We are also increasingly seeing new launches of emerging market funds excluding China, as many struggle to get to grips with an increasing state regulatory presence in business and potential violations of human rights. That said, China is definitely a country to keep an eye on for the second half of the year, as it currently stands out as one of the cheaper markets. It is not out of the realms of possibility that it has a resurgence, just like the tech sector this year.

One area that has gained a lot of headlines of late but doesn't feature at all among the leading funds is Japan. The headlines at half year tell you that the market is up over 25%, depending on which index you look at - but that’s in yen terms. For UK investors, MSCI Japan is up just 7%, reflecting an increasingly weak yen due to the ongoing policy of holding the 10-year government bond yields down at 0.5%. Given the moves up in other bond yields, this has significantly weakened the currency. Plenty of commentators expect the Bank of Japan to relax their policy, not least because inflation has taken hold in Japan, albeit still only around the 3-4% level. In that instance, one would expect some currency appreciation, so again it may feature on this list come the end of the year.

10 best performing UK-domiciled funds in first six months 2023


Total return (%) in GBP

Liontrust Global Technology


T. Rowe Price Global Technology


L&G Global Technology Index


Natixis Loomis Sayles US Equity Leaders


VT Holland Advisors Equity


Morgan Stanley US Advantage


Morgan Stanley Global Insight


Baillie Gifford American


Janus Henderson Global Technology Leaders


UBS US Growth


10 worst performing UK-domiciled funds in first six months 2023

abrdn China A Share Equity


ASI Strategic Investment Allc


TM Stonehg Flm Opps


SVS Aubrey China


JPM China


WS Charteris Gold and Prec Mtls


Allianz China A-Shares Equity


FSSA All China


Janus Henderson China Opps


Premier Miton UK Smaller Companies


Source: Morningstar, Quilter Cheviot as at 30/06/2023

The investment trust space has similarly seen a return to form for technology focused investments, with Polar Capital Technology and Allianz Technology Trust both hitting the top ten. Interestingly, however, fellow tech titan Scottish Mortgage has still not achieved the feats of 2020/21, despite its heavy weighting to the sector as it looks to battle back.

One trend that has been noticeable in the investment trust space, though, is the meaningful improvement in the discounts of some trusts, particularly those investing in some parts of private equity. This was a sector that came under huge pressure as interest rates rose and growth investing faced somewhat of a headwind. However with underlying asset values holding up and quoted growth equities performing very well, some of these wide discounts have naturally reduced.

Looking at the laggards, we can see more illiquid assets, such as infrastructure and renewables, struggling as these are also often most sensitive to rising interest rates. One of the key benefits of investment trusts is their ability to invest in illiquid assets, but this clearly comes with its own set of consequences and again helps to make the case for investing in the long-term. As interest rates begin to come down again, assets such as these should once again come good, particularly given the long-term tailwinds in place for these sectors.

Some areas of private equity also weren't immune from the difficult environment at the beginning of the year. Ultimately private equity is just like listed equity spanning multiple sectors, regions and sizes, and thus investments will be hit by their own set of factors, as well as more macro driven ones, such as interest rates and the global economy.

Where the second half of 2023 leads us will be fascinating. There are certainly areas of the market that look optically cheap, at least on a relative basis, but all face their own challenges. Equally the areas that have the momentum at present must at some point take a breather, but as ever predicting that is always a very difficult task.

Ten best performing investment trusts first six months 2023


Price Total Return (%)

Amadeo Air Four Plus


NB Distressed Debt Extended




Manchester & London 


Polar Capital Technology 


Allianz Technology Trust 




Pollen Street


Martin Currie Global Portfolio


abrdn Japan


Ten worst performing investment trusts first six months 2023

Seraphim Space




Ecofin US Renewables Infrastructure


BB Biotech


Digital 9 Infrastructure


JPMorgan Chinese Growth & Income


ICG-Longbow Senior Secured UK Property Debt


Balanced Commercial Property


GCP Asset Backed Income


abrdn Property Income


Source: JPMorgan, Quilter Cheviot, as at 30/06/2023. Excludes investment trusts with market cap below £20m


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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