The investment landscape in 2023 saw some remarkable winners and losers. While the technology sector soared to new heights, other sectors faced challenges that caused them to lag behind. Let's take a closer look at the best and worst-performing investment trusts of 2023.
The Winners: Technology and Aircraft Leasing
The technology sector stole the show in 2023, rebounding strongly after a disastrous 2022. Artificial intelligence (AI) played a significant role in this resurgence, with tech giants like Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla leading the charge. As a result, investment trusts focusing on technology saw impressive returns. Polar Capital Technology Trust and Allianz Technology Trust, for example, returned 50.5% and 44.5% respectively, securing their spots among the best performers of the year. These trusts had significant holdings in the US tech mega-caps, further boosting their performance.
Caption: Technology sector leading the way in 2023. Source: FE Analytics
Aircraft leasing trusts also had a strong showing. Nimrod Air Two and Amedeo Air Four Plus, specializing in aircraft leasing, made the list for the second year in a row. These trusts experienced a challenging period during the Covid pandemic but have been recovering since the resumption of international travel. Their returns of 48.2% and 30.4% respectively in 2023 highlight their resilience.
Notable Performers: Japanese Equities and Indian Mid- and Small-Cap Rally
Japanese equities enjoyed a moment in the sun in 2023 as the local stock market reached its highest level in 33 years. Nippon Active Value Fund, an activist investor, particularly shone with a return of 41.1%, securing its place among the best-performing investment trusts of the year. The trust's notable accomplishment included absorbing its competitors and boasting a substantial market capitalization.
In India, the mid- and small-cap rally brought success to India Capital Growth, specializing in this segment of the Indian stock market. The trust's 34.1% return in 2023 proves its proficiency in capturing opportunities in this dynamic market.
The Losers: IT Renewable Energy Infrastructure and Property Sectors
On the other end of the spectrum, investment trusts from the IT Renewable Energy Infrastructure sector faced significant challenges in 2023. Higher inflation, interest rates, energy security concerns following the Russian invasion of Ukraine, and issues related to cost disclosure weighed heavily on these trusts. Ecofin U.S. Renewables Infrastructure Trust, US Solar, and HydrogenOne Capital Growth were among the bottom-performing investment trusts of the year.
Property-related sectors also experienced a tough year. Regional REIT from the IT Property - UK Commercial sector, Schroder Ground Rents Income from the IT Property - UK Residential sector, and Longbow Senior Secured UK Property Debt Investments from the IT Property - Debt sector all struggled to deliver positive returns.
Chinese equities faced a series of challenges, including weak economic data, geopolitical tension with Western countries, and a worsening crisis in the local property sector. JPMorgan China Growth & Income, in the IT China/Greater China sector, was one of the investment trusts most affected by these headwinds, making it part of the worst-performing investment trusts of 2023.
The Worst Performer: GRIT Investment Trust
The worst-performing investment trust of 2023 was GRIT Investment Trust, specializing in small- and mid-cap natural resources and mining companies. The trust reported a loss of £83,000 in the first half of the year. The challenging economic background, marked by increased interest rates, high inflation in the UK, and global uncertainties surrounding the Russia-Ukraine conflict, presented significant hurdles for GRIT Investment Trust. Nonetheless, the trust's board persevered, seeking opportunities to pivot and find a suitable reverse takeover target.
In conclusion, 2023 showcased the dominance of the technology sector and the resilience of aircraft leasing trusts. At the same time, challenges in the renewable energy infrastructure, property, and Chinese equities sectors led to disappointing performances. As investors, it is essential to assess the market landscape and consider the factors impacting different sectors when making investment decisions.
Source: FE Analytics
