It has been an inauspicious start to the year for the Trustnet team’s 2023 fund picks, with much room for improvement heading into the second half.
None of our picks have beaten the MSCI World index over the past six months, which has been on a tear to start the year following a disappointing 2022.
Developed market stocks have made headway, up 8.9%, buoyed by the rise of big name technology stocks that have risen on the back of a boom in artificial intelligence (AI) thanks to software such as ChatGPT, among others. The MSCI ACWI, which includes emerging markets, is up 7.8%.
The best of our picks has come from reporter Matteo Anelli, with Royal London Sustainable World Trust up 7.6%, the third best return in the IA Mixed Investment 40-85% Shares sector over this time.
Performance of Trustnet fund picks in H1 2023
Source: FE Analytics
Environmental, social and governance (ESG) strategies suffered last year as oil and commodity stocks soared on the back of the war in Ukraine – and subsequent sanctions imposed on Russian exports – as well as rising interest rates to combat higher inflation, which adversely affected growth stocks.
These strategies have rebounded somewhat in 2023 and it is by far the standout pick of our selections from the start of the year.
Back then, rampant inflation and hawkish central banks suggested a recession was soon to be on the cards across the developed world, but this has yet to be as severe as first thought.
Our next-best pick is editor Jonathan Jones’ selection of Fidelity Asia Pacific Opportunities, despite making a paltry 0.8% gain.
The recession he predicted in the first half of the year has yet to come through and Asia has been a disappointing area to invest this year (more on that to come), but despite getting his calls mostly wrong, his fund selection has stopped his pick from disaster. Indeed, the Fidelity fund has been a top-quartile performer in the IA Asia Pacific Excluding Japan sector in 2023 so far.
This is particularly impressive considering its 27.4% weighting to China, a market that has tanked despite optimism that the removal of Covid restrictions at the start of the year would unleash consumer spending.
Performance of index H1 2023
Source: FE Analytics
Economic data has disappointed largely thanks to an ongoing trade war with the US, with the MSCI China index down 10.6% over the past six months.
This has been the downfall of reporter Tom Aylott, with his selection of Allianz China A-Shares sitting as the worst of our picks so far, down 17%.
At the time, he suggested buying the fund incrementally on the way down and, if he has been sticking to this, he could be in for a good return if things turn around before the end of 2023.
Our two other picks made at the start of the year are also down, but not by as much. Former Trustnet Magazine editor Anthony Luzio once again backed UK smaller companies for the third year in a row, despite middling performance in both 2021 and 2022.
A modest 2.5% loss for his JP Morgan UK Smaller Companies Trust pick so far this year can be attributed to investors taking less risk by buying fixed income strategies that now offer appealing yields. Additionally, when they have been taking on more risk, it has tended to be up the market-cap scale through big technology names rather than through backing the minnows.
FE fundinfo head of editorial Gary Jackson selected Janus Henderson Strategic Bond, which is down 0.1% so far this year, slightly below its peer group, with the average fund in the IA Sterling Strategic Bond sector making a 0.5% gain.
While the majority of our picks centred upon taking risk for a quick recovery, Jackson was the most bearish of the group, backing a bond fund in the expectation that the world would enter recession – a threat that is by no means over.
There is a long way to go and as many great football commentators have said: it’s a game of two halves.
Performance of Trustnet fund picks in H1 2023
Source: FE Analytics
None of us predicted the sudden rise in AI or the rebound for technology stocks to start the year, but some already believe this could be short-lived with central banks remaining hell-bent on reducing inflation, which has proven extraordinarily sticky.
How this will impact our selections is anyone’s guess, but we will be hoping for an improvement by the year’s end, with the average performance of our picks standing at a current overall loss of 4.6% at the halfway mark.
It is important to remember, however, all of our selections are personal views and by no means count as investment advice.