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The 16 funds on track for another year at the very top of the IA Global sector

21 June 2024

Trustnet looks for global funds that are top decile in 2023 and over 2024 to date.

By Gary Jackson,

Head of editorial, FE fundinfo

Significant holdings in tech darling Nvidia helped a handful of global equity funds to make top-decile returns last year and are keeping them at the top of the sector in 2024 as well, research by Trustnet has found.

Data from FE Analytics shows there are 16 IA Global funds that made first-decile returns in 2023 and are repeating this sector-topping performance over 2024 so far, with the majority of them holding the artificial intelligence (AI) chip giant in their top 10 holdings.

All of these funds follow the growth style of investing, which looks for companies that are expected to grow faster than the market. This style was hit hard in 2022, when interest rates were hiked, but has bounced back in the time since.

The 16 IA Global funds to have made first-quartile total returns in 2023 and over 2024 to date can be seen in the table below, ranked by their performance across the entire period. The top fund, however, is the only one without Nvidia among its largest positions.

Source: FE Analytics. Total return in sterling to 19 Jun 2024

WisdomTree Blockchain UCITS ETF invests in companies primarily involved in blockchain and cryptocurrency technologies, while excluding any that do not meet WisdomTree’s environmental, social and governance (ESG) criteria.

Stocks owned by the ETF fall into two categories: ‘blockchain enablers’, or the companies that develop building block components for blockchain ecosystems, and ‘blockchain engagers’, or companies that provide blockchain and cryptocurrency services and/or applications.

Among the top holdings are electronic trading platform Robinhood Markets, business intelligence provider MicroStrategy, cryptocurrency platform Coinbase Global and bitcoin mining data centre operators Iris Energy and Cleanspark.

While blockchain has enjoyed a strong run of late, WisdomTree expects this technology to be a long-term trend with applications in areas such as decentralised finance, Web 3.0 and the Metaverse.

“Blockchain technology is undoubtedly a revolution in the making. Wherever a transparent, immutable and digital record of information could be useful, blockchain has the potential to disrupt the status quo,” the firm said.

“The variety of applications and use cases for blockchain are becoming more apparent and can be seen across many industries. As such, the range of potential applications for the technology is far-reaching and the future looks bright for companies involved in the blockchain, even if we are at the early stages of proliferation.”

However, this is not the only tech trend that has helped some funds top the IA Global sector in both 2023 and 2024 to date. The appearance of the Polar Capital Artificial Intelligence fund in third place reflects the boost in AI stocks that followed the ‘ChatGPT moment’ in late 2022.

Since OpenAI launched ChatGPT, generative AI has been a hot theme and has underpinned much of the performance of the global equity market over the past two years.

Again, advocates of this technology do not see it as being a short-term surge, with Polar Capital Artificial Intelligence’s managers earlier this year saying: “Generative AI is a rare example of discontinuous technology change. We are at a critical turning point where an entirely new compute architecture/stack is required and, as per earlier technology cycles, prior winners are unlikely to be the future leaders.

“The large incumbents know what the technology is and what they need to do but their business models (like Search in the case of Google) are built around legacy technology. While a transition is possible, the current pace of AI progress threatens to widen the gap between leaders and laggards until it happens, not to mention the room it leaves for new entrants to gain a foothold, such as OpenAI.”

An example of a company benefitting from the rise of AI is Nvidia, which is seen as one of the major ways to take exposure to the AI theme because of its leading role in developing advanced graphics processing units (GPUs) that power AI applications. Its technology is essential for training and deploying machine learning models across various industries, making it a key player in the AI sector.

Even the funds on the above list of outperformers that are not dedicated tech strategies can credit their strong returns to this theme. Every one aside from WisdomTree Blockchain UCITS ETF have a top 10 holding in Nvidia, the latest available positioning data shows.

The stock has rocketed since 2022’s ChatGPT moment, which caused investors to flock to companies linked to the rollout of AI. A group of these companies known as the Magnificent Seven (Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla) have performed especially well and all of the funds (again, apart from WisdomTree Blockchain UCITS) own more than one of these stocks in their top 10.

Mark Baribeau, head of global equity at Jennison Associates and manager of the PGIM Jennison Global Equity Opportunities fund (which appears in second place in the table above), said: “In uncertain times like these, there are still companies that can manage to remain on the cutting edge by making our daily lives more efficient with new products or by helping us to work together more productively with new services. These companies, which should continue to see healthy customer demand and sales growth, offer the kind of investment opportunities we seek.

“In general, we think successful growth investing requires a selective and active approach focused on carefully weighing the long-term opportunities against the risks. There will be more market volatility in the months ahead and stock picking will become paramount, creating challenges for passive investors. Active managers can look through the short-term noise and focus on the bigger long-term opportunities by spotting secular growth trends early.”

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.