The top 10 best performing sectors of 2024

We run a rule over the best performing sectors of 2024…by Jo Groves

 

As another year bites the dust, it’s a good opportunity to look back at the sectors lighting up our portfolios in 2024 and, well, those we’d rather forget (looking at you, Latin America). To keep things in the spirit of Dry January, we’re raising a glass of sparkling water to last year’s biggest winners (spoiler alert: it may be magnificent but it wasn’t the US).

With a tenuous nod to The Lord of the Rings, in the first part of our (distinctly less epic) saga I’ll canter through the top-performing sectors of 2024, while my colleague David will take the reins next week to look at the market outlooks for 2025.

Indeed, escorting the One Ring to Mordor might have been an easier task than tackling some of the geopolitical and macroeconomic hurdles faced by investors in 2024. Geopolitical tension continued to cast a shadow while it was all change for the political leaders on both sides of the Atlantic.

But it wasn’t all doom and gloom for investors: inflation headed downwards and rate hikes went into reverse. While the UK exited the shallowest and shortest recession in its history, the US churned out GDP growth like it was printing money (which it was in fairness).

Turning to the sectors, North America may have taken centre stage thanks to the dizzying ascent of the Magnificent Seven but it was the dark horses that stole the show when all was said and done. So, without further ado, here are the top-performing sectors of 2024 and their associated table-topping trusts…
 

The top 10 best-performing sectors

 

The highest-performing AIC sectors in 2024 were as follows:

 

Source: FE Analytics, based on share price total returns by AIC sector for 2024 in GBP (excluding sectors with a total NAV of under £2 billion).

 

Leading the charge in 2024 was Growth Capital, stealing the spotlight with a dazzling 33% total return and reminding us why private markets are often where the real magic happens. Hot on its heels was the Hedge Fund sector, delivering a robust 25% return and knocking North America into third place with a 23% return.

Emerging markets also flexed their muscles, with Global Emerging Markets and India posting respective returns of 21% and 18%. Emerging markets offer strong secular growth drivers thanks to thriving domestic consumer markets and favourable demographic trends, proving there’s plenty of opportunity beyond the usual suspects.

Rounding out the top 10 were global-focused sectors such as Global Smaller Companies and Global Equity Income (each returning 13%) while UK All Companies brought up the rear with a respectable 12%.

It just goes to show that the investment trust universe offered up a veritable smorgasbord of opportunities for active managers to generate alpha in 2024.

 

The podium winners of 2024

 

Gold: Growth Capital

 

Top of the leaderboard Growth Capital highlighted the potential returns away from the scrutiny of public markets. Given a challenging IPO market, many high-growth companies are choosing to stay in the private sphere for longer but offer an attractive combination of disruptive technologies and scalable business models.

The shining star was Petershill Partners (PHLL) which boasted an impressive 64% return. Managed by Goldman Sachs, it acquires minority stakes in private equity, hedge funds, and alternative investment firms across North America, Europe and Asia.

 

Silver: Hedge Funds

 

Traditionally the preserve of institutional investors and high net-worth individuals, hedge funds are now accessible to retail investors via an investment trust wrapper. The bond and equity market rout of 2022 rocked traditional 60-40 equity-bond portfolios, prompting investors to seek alternative diversifiers such as hedge funds to protect against downside risk.

Hedge funds aim to generate positive returns in both rising and falling markets using sophisticated tools to capitalise on market inefficiencies across equities, bonds and foreign exchange, to name but a few. Clocking in with a 25% return in 2024, hedge funds have proved their worth as a diversification tool for investors.

Top of the pack in 2024 was Alternative Liquidity Fund (ALF) with an annual return of 37%. Run by Warana Capital, ALF provides a fund of funds including alternative assets such as hedge, private equity and infrastructure funds.

 

Bronze: North America

 

North America is undoubtedly the most challenging market to outperform passive strategies thanks to the perennial question of whether or not to hold the Magnificent Seven?

Baillie Gifford US Growth (USA) answered that question with a resounding ‘yes’, posting a 56% return by blending the tech titans with high-growth private firms such as SpaceX and Stripe. Next up was the 33% return for JPMorgan American (JAM), proving the merits of active management despite the concentrated market.

 

Fourth place: Emerging Markets

 

Just outside the medals, emerging markets offer significant upside potential due to higher forecast economic growth than their developed peers and pricing opportunities from inefficient markets. They can also be good diversifiers with country-specific drivers supporting lower correlations to mainstream equity indices.

The catchily-named JPMorgan Emerging Europe, Middle East & Africa Securities (JEMA) took top honours for 2024, achieving a 48% return on the back of its exposure to commodities and technology-adopters.

India also continued its strong run, taking the honours of the world’s second largest equity fundraiser in 2024, behind only the US and eclipsing China for the first time as the top Asian market for listings. As well as a vast small and mid-cap universe, a lack of research makes the Indian stock market a fertile hunting ground for stock pickers.

The number one spot went to abrdn New India (ANII) with a return of 24%, with its bottom-up, high conviction portfolio driving a return to form in the past year. ANII’s quality focus differentiates the portfolio from its peer group and offers exposure to the boom in infrastructure spending and broadening financial services sector.

 

Fifth place: Global

 

Looking across the three global sectors, the top-performers included global small-cap specialist Herald (HRI) with an annual return of 26%, followed by a return of just under 25% for Brunner (BUT) and Edinburgh Worldwide (EWI).

While all three funds have significant US and UK exposure, it’s interesting to see that Herald topped the group with the highest share (c. 40%) of the portfolio invested in the UK. Herald is also the top performer in the AIC Global Smaller Companies sector with a five-year share price return of 70%.

Also shining brightly was JPMorgan Global Growth & Income (JGGI) which has been a perennial favourite on our monthly analysis of UK investors’ buy lists and offers investors a high-conviction, US tech-focused portfolio.

 

Runner up: UK

 

Despite a mixed bag of economic fortunes, the UK proved it can still punch above its weight when it comes to returns.

Rockwood Strategic (RKW) took the honours with a 28% return, backed by a private equity-style approach to implement ‘self-help’ strategies rather than being a hostage to fortunes of the wider UK economy.

Not too far behind, Henderson Opportunities (HOT) delivered 24%, buoyed by strong performances from UK stalwarts like Rolls-Royce, Barclays and Marks & Spencer, showing that undervalued markets can offer significant returns with the right strategy.

 

Takeaways from 2024

 

From private equity and hedge funds to emerging markets and global strategies, 2024 proved that you don’t necessarily have to sacrifice returns by venturing beyond Magnificent Seven. And if the current concentration of US tech leviathans unwinds at some point, there may be merit in having a few eggs in a different basket.

That said, past performance isn’t a good indicator of future returns so it’s time to pass the baton (or should that be ring?) to my colleague David who will be looking at the outlook for the year ahead in next Sunday’s article.

 

All data at 13/01/2025 and annual returns are based on share price total returns.