July was a poor month for technology funds across the board as the IA Technology and Technology Innovation sector slid 7.44%, dragging other tech-aligned markets with it, according to Ben Yearsley, director at Fairview Investing.
The IA Global Emerging Markets and IA Asia Pacific ex Japan peer groups were also down 6.9% and 5.3%, respectively, as last week’s sell-off hit both markets hard.
In the US market, investors reacted poorly to hyperscalers’ spending plans, despite strong revenue growth from some names. Meanwhile, the Korean Kospi ended the month at 6,595, down from 8,500. This came even though the market rebounded 17.9% on Friday, according to Yearsley.
“That shows the problem when a few large companies dominate an index; SK Hynix is approximately 25% of the KOPSI,” Yearsley said. Concerns over the emergence of cheap Chinese memory stocks also contributed to some of these falls, according to experts last week.
This is visible in the performance of funds, with Polar Global Technology and Polar Artificial Intelligence both down 20.3% and 18.5% respectively. Meanwhile, Barings Korea slid 22.7%, one of the worst performances in the IA universe, and JPM Korea Equity wasn’t far behind with a 21.4% fall.
“What goes up must come back down; well, it’s been a rocky few months for tech, and maybe a breather is just what’s needed,” said Yearsley.
“For those long-term investors, profits will still be great, but the shorter-term volatility has been huge.”
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Meanwhile, on the more positive front, it was a strong month for the UK with all three sectors (IA UK Equity Income, IA UK All Companies and IA UK Smaller Companies) all in the top five of the fund sectors. In the closed-ended space, IT UK All Companies and IT UK Equity Income were the third and fourth best performing sector overall.
Yearsley said: “That was an interesting month for markets with the FTSE serenely sailing through it and in the process hitting an intra-day high of 10,989 though it did finish July slightly off that.”
Some of that was owing to strong performances from UK stalwarts, with banks such as NatWest and other big listed names such as Unilever and Shell all performing above expectations. The strong performance from banks may have also contributed to the 4.1% rise in the IA Financials and Financial Innovation sector.
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Yearsley noted the top 10 best performing funds were something of a mixed bag with no clear theme. Guinness Global Energy and WS Guinness Global Energy topped the chart with 11.7% and 10.8% returns, but otherwise there were UK funds, global value funds, Japan and even a private equity fund.
“Veteran stock picker Andy Brough steered his Schroder UK Mid 250 fund into third, and the Kernow Equity Navigator, managed from Cornwall, came eighth with a gain of 9.58% – it’s another UK-invested fund,” Yearsley noted.
Ben Whitmore also made an appearance, with his Brickwood Global Value fund up 9.9%.
In the investment trust space, the top strategy of the month was 3i Group at 15.2% and RIT Capital Partners at 12%. That said, it was still a good performance from UK strategies, with Greencoat UK Wind and the small-cap-focused Artemis UK Future Leaders Trust also up 10%.
