It’s that time of year again when Asset Allocator takes a look at some of the best-performing global equity funds of 2023 and how DFMs did at picking them.
Our DFMs have reason to be cheerful, having held a higher proportion of outperforming global equity funds than they did in 2022.
When measured against the MSCI World index, 18 per cent of allocators’ equity funds have outperformed the benchmark, as opposed to just 10 per cent last year.
What makes this impressive is that only 19 per cent of funds outperformed the benchmark in total, suggesting DFMs were pretty much on the money this year.
The change in fortunes can be seen by the fact the MSCI World returned 13.4 per cent in 2023 compared to a loss of 2.7 per cent in 2022.
There were a couple of funds that stood out to us as ones worth discussing (bear in mind funds which track an index were excluded from this exercise).
The best-returning fund held by our allocators this year was Blue Whale Growth, which took home 22.8 per cent for investors.
This fund is run by Stephen Yiu and its biggest investor is Peter Hargreaves, who previously disclosed that his stake in the fund reached more than £200mn.
Blue Whale Growth has received a lot of publicity (it helps when the founder of Hargreaves Lansdown is a major backer) but so far it is only owned by one allocator we follow.
The fund has a stonking overweight to tech at 45 per cent of the fund while the sector only has an average exposure of about 25 per cent and its biggest holding is Nvidia, so it has been well placed to benefit from the AI boom.
The second-best performing global fund in our database was Gam Star Disruptive Growth which returned 21 per cent and which has a 65 per cent exposure to tech.
Speaking of big exposures to tech, the top performing global fund so far this year is the Manchester & London investment trust which returned a stonking 64 per cent. That return was certainly helped by the 32 per cent holding of Microsoft, plus its 20 per cent stake in Nvidia.
This is an incredibly concentrated risk that has quite remarkably paid off this year.
None of the DFMS we monitor own this fund, perhaps put off by the highly concentrated state of the portfolio (the fund’s top 10 holdings account for 98 per cent of its assets).
Meanwhile, Schroders Green Energy Transition has been on a bit of a rollercoaster – going from one of the best performers in 2022 to one of the very worst in 2023, perhaps as challenges to wind power have begun to bite on optimism surrounding renewable energy, along with higher interest rates.
The most popular outperformers were Brown Advisory Global Leaders and Evenlode Global Equity, which are owned by two allocators each and which returned 14 per cent and 15 per cent respectively.
These are just a couple of highlights in the global equity sector, which has seen a resurgence of interest among allocators since we last checked.
In June, the average allocations stood at just five per cent, perhaps as uncertain market conditions made DFMs unwilling to effectively outsource their equity picks, but now it’s the highest we’ve seen in some years – an impressive 12 and a half per cent.
Part of the reason for the upswing can be attributed to some of our fund houses upping their allocations considerably. LGT holds 43 per cent, Rathbones holds 50 per cent.
A large number of DFMs who allocate zero to global equity funds, among them such large houses as Brewin Dolphin, Evelyn Partners and Liontrust.
