The best investment decisions of 2023

As we stand on the threshold of a new year, now is an opportune time to engage in a thoughtful year-end reflection. Beyond merely recounting the events of 2023, it’s an invitation to distill valuable lessons from each moment. Picture commencing 2024 armed with insights derived from both triumphs and challenges, steering your intentions toward a vision of success.

In bidding farewell to 2023, seven Elite Rated managers share their perspectives on their most impactful investment decisions of the year.

James Mee, co-head of multi-asset strategies at Waverton and manager of Waverton Multi-Asset Income fund

“We took a position in UK house builder Persimmon in July 2023. The company’s shares had fallen 70% in the preceding 12 months, courtesy of a slowing economy, higher mortgage rates, net neutrality rules and the shift from a 300,000 net new homes “target” to “advisory” number. Perversely, this vulnerability could become its ace in 2024: as we move towards a general election, we expect commitments from both parties on housing (indeed, they have already begun). Meanwhile, build costs are declining and mortgage rates seem to have peaked. The shares are up +48% since purchase.”

Will McIntosh Whyte, co-manager of Rathbone Strategic Growth Portfolio fund

“The medical technology space came under significant pressure over the summer, as investors became concerned over the potential impact on long-term growth prospects from the weight-loss drugs coming to market. This impacted the portfolios where we held a number of names in this space. However, we took the decision to add to these names on weakness, having done significant work on the area. The sector has subsequently bounced back from significantly oversold levels. Whilst this may not have had as much impact on the portfolio as some of our other actions, such as adding duration through the year and owning decent weights in large cap tech, it was perhaps a harder decision given the weight of noise and consensus around the issue.”

Read more about the different ways to invest in healthcare

Paul Flood, manager of BNY Mellon Multi-Asset Income fund

“Being an income investor makes it difficult to gain exposure to some of the strongest thematic trends in the market. However, it also helps you to avoid the brutal downturns that can come with overvalued companies as great companies are not always great investments. It also makes you turn over a lot of stones that other investors overlook as they chase the headline grabbing names. As the narrative around AI picked up in the first half of 2023 we used it as an opportunity to increase our position in Taiwanese fabless semiconductor design company, MediaTek, which we believe is a beneficiary of this theme. The company did not disappoint and was the top contributor to performance over 2023 and provided a 10% dividend yield as well.”

Vincent McEntegart, co-manager of Aegon Diversified Monthly Income fund

“Our best decision in 2023 was to increase credit exposure from around 35% of net asset value in Q4 2022 to almost 50% in mid-2023. The year began with UK CPI over 10% and Central Banks aggressively raising interest rates to try and regain some control over soaring prices. Recession concerns were almost universal and safe havens preferred to riskier assets by many investors. The everything rally in Q4 2023 provided some welcome relief in a difficult year for safe havens and from equity markets dominated by seven US technology companies. With economic growth surprising to the upside, credit markets outperformed. For our fund, high yield bonds delivered consistent returns during 2023 and were the best performing credit allocation on a risk adjusted basis.”

Richard Parfect, co-manager of VT Momentum Diversified Income fund

“Despite already demonstrating strong returns in 2022, we held onto our two high income paying aircraft leasing funds Doric Nimrod Air 2 and 3. We had bought both vehicles heavily in the COVID crisis as we believed Emirates and the A380 would dominate in the recovery, which indeed came to pass as Emirates had its most profitable year ever in 2023. The future capacity problem faced by Emirates shows no sign of abating as the airline has committed to holding onto its A380 fleet and operating it into the 2040s. The loss of a door section by a B737 Max will do little to relieve Boeing of its problems and get its B777x program back on track, further increasing Emirates’ need for the A380. Overall, the returns of both vehicles, which are essentially akin to asset backed debt, outperformed global equities in sterling terms.”

Richard tells us more in our October 2023 interview:

Steven Andrews, manager of M&G Episode Income fund

“We were particularly pleased with our allocation to emerging market bonds which contributed 1.7% to gross fund performance in 2023, while showing lower volatility than Developed Market Sovereign Bonds such as US Treasuries. Emerging market bonds were a core part of our portfolio in 2023 and were a meaningful and differentiating driver of returns. The allocation highlights the truly global nature of our fund and the flexibility to diversify into less well-owned areas. We like the asset class as it offers attractive real yields, strong diversification properties and should continue to benefit from a favourable macroeconomic environment with emerging market inflation receding and easing monetary policy supportive of growth.”

David Lewis, co-manager of Jupiter Merlin Growth Portfolio

“2023 saw arguably one of the most widely anticipated recessions in history and that is why Jupiter Merlin’s decision to be fully invested in equities proved to be a highly valuable one. Although a severe market decline never arrived and many global macroeconomists were proved wrong, the continued ascent of interest rates took their toll in the fixed income arena, especially with regards to government-issued bonds. We believe that over the long-term, equities outperform bonds via the compounded growth of reinvesting their cash flows at high rates of return. 2023 serves as a reminder of the difficulty in divining market outcomes and urges us to make quality, long term investment decisions that will have a greater probability of success than trying to second guess the movements of complex and adaptive market systems.”

Want even more? Darius and Juliet reflect on the key moments from 2023 in our recent quarterly market update date: