Which funds (and sectors) topped the charts in 2023

Juliet Schooling Latter 13/12/2023 in Best performing funds, Multi-Asset

As the year draws to a close, and before fear and panic sets in as we realise how much there is left to do before the big day, we take a moment to reflect on the year gone by, highlighting the financial winners and losers of 2023.

This year has been dominated by military conflicts in Ukraine and the Middle East, and closer to home the UK has suffered high interest rates (which have now hopefully plateaued), high inflation (also easing off) and extreme weather conditions. In a turbulent world, it hasn’t been a bed of roses for financial markets.

So which areas of the market have benefitted from this environment, and which have suffered?

Best performing sectors

It may come as no surprise that the best performing sector of 2023 was Technology and Technology Innovation, with the average fund returning 32%*.

The sector made a significant comeback from its position as the second worst-performing sector in 2022 (returning -27.5%**), to top of the charts. Performance was almost entirely driven by the so-called ‘Magnificent Seven’ (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla).

Read more: Four ways to invest in technology

Technology is followed by two emerging market regions – Latin America (15.6%*) and India/Indian Subcontinent (14.7%*). Another surprise performer has been European equities, returning 9.7%* this year, in spite of the lacklustre economic backdrop of the region.

Best performing funds

The best performing Elite Rated fund in 2023 has been T. Rowe Price US Large Cap Growth Equity, which has returned 37.1%*. A concentrated, high-conviction strategy, investing in large US firms that demonstrate innovation and change, it included six of the ‘Magnificent Seven’: Microsoft, Apple, Amazon, Alphabet, Nvidia and Meta account for almost 43%*** of this fund.

In second and third place are Sanlam Global Artificial Intelligence and Baillie Gifford American, further reflecting the dominance of technology stocks, particularly those with exposure to artificial intelligence, and the high returns of US equities in recent years.

Read more: Beyond the Magnificent Seven

Top 10 performing Elite Rated funds in 2023

RankFund namePercentage returns year to date*
1T. Rowe Price US Large Cap Growth Equity37.1%
2Sanlam Global Artificial Intelligence31.4%
3Baillie Gifford American30.6%
4Guinness Global Innovators26.4%
5AXA Framlington Global Technology26.3%
6Ninety One UK Special Situations21.6%
7GAM Star Disruptive Growth21.4%
8Brown Advisory US Flexible Equity21.1%
9BlackRock Global Unconstrained Equity20.4%
10AXA Framlington American Growth20.2%

The under performers

At the other end of the table, the China/Greater China sector was by far the worst performing, with average returns of -20.6%*. 

China has been facing political risk and economic challenges, including continued real estate issues, weak consumer demand, poor growth and deflation. The World Bank has cut its forecast for China’s growth in 2024**** and warned that the country’s economic weakness could drag the wider region to its worst growth in half a century.

However, could this be the perfect time to invest in China at incredibly cheap valuations? China is still the second largest economy in the world. If the consumer was to come back and sentiment improved with a softening of geo-political risks, it’s not impossible to see China at the top of the best performers list next year.

The second and third worst performing sectors were Commodity/Natural Resources and Healthcare at -7.5% and -7.4% respectfully*.

Commodity and natural resources saw a strong reversal in fortunes this year from top of the charts in 2022**. Commodity prices have dropped as the world has adjusted its energy supply. Performance is also linked to China’s economic weakness, prompting lower demand for commodities for infrastructure development. If the Chinese economic situation picked up, this sector might revive.

Healthcare has been hit by rising interest rates, however, if rates were to come down next year, healthcare would also benefit. Gareth Powell, manager of the Polar Capital Global Healthcare Trust, gave us thoughts on the outlook for healthcare in 2024 in a recent interview. 

Watch the full interview as he discusses the recent underperformance of healthcare stocks and three key themes that present significant opportunities for investors in 2024 and beyond.

*Source: FE Analytics, total returns in sterling, 1 January 2023 to 7 December 2023

**Source: FE Analytics, total returns in sterling, 1 January 2022 to 31 December 2022

***Source: fund factsheet, 31 October 2023

****Source: The economic times, 2 Oct 2023

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.