Mid-year review: which funds have performed best so far in 2023?

UK investors started 2023 bruised by the impact of Liz Truss’s short but painful government, but hopeful that the macroeconomic outlook might at least stop getting worse.

However, as we reach the half-way point of 2023, uncertainties still persist, inflation – at least in the UK – is staying uncomfortably high, and interest rates are still rising. We’ve even had a mini banking crisis just to add to the misery.

There has been some good news though. More than half the different fund sectors have posted positive results so far this year*.

Best performing sectors so far in 2023*

Thanks in no small part to the huge surge in interest in Artificial Intelligence, the best performing sector in 2023 so far has been the IA Technology and Technology Innovation sector, where the average fund has returned 22.7%* for investors.

It is followed by IA Latin America (up 12.1%*) and IA Japan, which is up 6.6%*. IA North America and IA Europe including the UK make up the rest of the top five, with average returns of 6.3% and 5.6% respectively*.

In contrast, the worst performing sector was IA China/Greater China, which posted average losses of 12.1%*, followed by IA Commodity/Natural resources (down 8%*) and IA Property other (down 6.2%*). IA Infrastructure and IA UK Index Linked Gilts made up the remaining two places in the bottom five sectors posting losses of 5.6% and 3.3%* respectively.

Could it be a year of two halves?

“The first half of 2023 has been surprisingly good for equities,” commented Darius McDermott, managing director of FundCalibre. “AI’s iPhone moment has meant US tech stocks have been on the attack, with the NASDAQ index up some 30%* and some stocks like Nvidia up 190% and Meta up 130%**!”

Sticky core inflation has meant that bond yields haven’t collapsed as expected, so bonds have not done so well. And China has been weaker than expected, dragging Asia and commodities down with it. “Weaker than expected demand for metals from China and a possible industrial slowdown in the US and Europe are weighing heavily on the market,” commented the managers of the TB Amati Strategic Metals fund.

“Will bonds come out for the second half of the year ready to defend investors as interest rates finally bite? We’ll have to wait and see,” concludes Darius.

Best performing Elite Rated funds so far in 2023*

When it comes to individual funds, the best performing Elite Rated fund so far in 2023 has been Baillie Gifford American. After a very difficult 2023 when the fund posted a loss of more 50%*** as its style went quickly out favour, investors will be encouraged to learn that it has returned 25.5% in the first half of this year*.

It is followed in second place by T. Rowe Price US Large Cap Growth Equity, which returned 22.9%* and Sanlam Global Artificial Intelligence in third place with returns of 21.6%*.

*Source: FE fundinfo, total returns in sterling, 31 December 2022 to 23 June 2023

**Source: Google finance, 30 December 2022 to 23 June 2023

***Source: FE fundinfo, total returns in sterling, calendar year 2022