Eve Maddock-Jones (pictured), features editor at Investment Week
Just 27 funds made money every month in 2023, out of more than 5,000. I’ll let that sink in.
As our glorious leader James Baxter-Derrington penned back in November, timing the market is a hard thing to do, and the best bet for investors is to spend as long as possible in them.
I wanted to expand on that and see what the real cost of sticking with your investments was this year, for better or worse.
One of the better parts of January is getting a full year's worth of data on all funds and trusts, allowing you to take a deep dive into their performance statistics. (The little things that make me happy).
I decided to look at the top 20 IA open-ended funds for 2023, best on an annual returns basis, and examine what it really cost investors to buy into them.
The average return of these outperformers was 60.7%, with the HANetf Grayscale Future of Finance UCITS ETF racking up almost 130% for clients who stuck with it all year.
But to get that, they would have had to stomach months in which the fund fell over 22% and endured some of the highest volatility of the group.
Best performing funds of 2023 offer triple-digit returns but poor timing spells 30% loss
The biggest stomach dropper was the WisdomTree Blockchain UCITS ETF, which also more than doubled an initial investment over the course of the year (107.6%).
However, a worst-case mistiming would have cost an investor 34.6%, and a 72.5% volatility ratio to boot.
This perfectly evidences the market truism at the core of this ramble - that it's time in the market versus timing the market.
But even then, none of these 20 names made investors money every month, although (as I teased) 27 others did.
While the top annual performers were invested in blockchain and technology generally, the ‘steady-eddies' were from the more expected bond and fixed income sphere, as well as a dash of cash funds.
The average total return of this group was 5.4%, and, generally, made returns of 4%-6% for the year.
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A leap away from Grayscale's 2023 returns, but, arguably, it would have caused you a lot less stress to at least make something in a year when many portfolios failed to deliver at all.
For context, not a single investment trust made money every month in 2023.
Even the universe's £22bn big hitter 3i Group didn't manage it, making money every month bar October (when it lost 6.7%).
However, three trusts succeeded in losing money every month: BENS Creek Group, Regional REIT Limited 4.5% BDS 06/08/24 and Greencoat Renewables.
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Interestingly, every single open-ended fund managed to hit at least 0% returns one month of the year.
This is what happened with the £1.8bn Schroder UK Real Estate fund, which posted negative returns every month of 2023 right up until December, saving it from being the solitary negative callout.
My take: the market truism we knew to be true is confirmed, that getting in and staying in makes a hell of a lot of difference to your end returns.
My other take: that a lot of funds got fairly lucky with the late equity rally, otherwise I'm sure the ‘name and shame' list would have been a lot longer.
This article was first published as part of the Friday Briefing series, which is available exclusively to Investment Week members each week. Sign up here to receive the Friday Briefing to your inbox each week.
