Three UK-domiciled funds got their 2024 off to a flying start by attracting large inflows despite serious macroeconomic headwinds, Morningstar data shows.
Out of 285 funds worth £1 billion and above, for January, the Five-Star M&G Japan fund, managed by Carl Vine, came in first place, pulling in over £303 million.
The Four-Star Royal London UK Core Equity Tilt fund, meanwhile, co-managed by Nils Gene Jungbacke and Mike Sprot, followed suit with inflows of over £212 million in the first month of the year. In third place, the £7.9 billion ACS World ESG Insights Equity fund, which is run by BlackRock, absorbed £207.5 million.
M&G Japan
Carl Vine's fund continues to be popular with retail investors, with the £2.3 billion M&G Japan strategy, which invests solely in large-cap Japanese companies, boasting a cumulative return of 34.71% over the three years to February 2024.
Although the fund slightly underperformed the Morningstar Japan Index TME, which returned 41.77% over that same period.
However, Morningstar analysts point to the success of the fund since Vine took the reins at the beginning of October 2019. They say he has provided an "impressive" performance, delivering a 7.5% annualised return versus 2.8% and 2.4% for the Morningstar Japan TME Index and the Morningstar Japan large cap peer group, respectively.
The significant outperformance has been driven by Vine's stock selection, especially within industrials and consumer cyclicals sectors. While investing in Socionext (6526), Mitsui O.S.K. Lines (9104), and Hitachi Zosen (7004), paid off because they returned multiples more than their initial investment, although contributions have been broad based elsewhere.
The fund's current top holdings range from Mitsubishi UFJ (MUFG), Toyota (7023), to Seven & I Holdings (3382).
Royal London UK Core Equity Tilt
The £6.1 billion Royal London UK Core Equity fund has bucked trends, absorbing inflows despite the exodus of investor cash from UK equity funds.
The fund outpaced the Morningstar UK All Cap TME Index over the three years to February 2024, returning 25.52% versus the index's own 24.08% return.
From December 2021 to December 2022 the fund had a measly return of only 1%, but the following year from December 2022 to December 2023 its performance improved to 9%.
The fund's top sector holding is financials, at 23% of the portfolio, with consumer staples and consumer discretionary following suit at 14.3% and 12.3% of the fund, respectively. its top holding is Shell (SHEL) at 7.3%, which drove strong returns following Russia's invasion of Ukraine and western introspection over energy supply.
AstraZeneca (AZN), HSBC (HSBA), Unilever (ULVR), and BP (BP) are also top holdings of the fund at 7.0%, 5.4%, 4.3%, and 3.6%, respectively.
However, Morningstar analysts give the fund their second-lowest Morningstar Sustainability Rating of two Globes, indicating it holds securities with relatively-high ESG risk compared to those of its peers in the UK Equity Large Cap category.
The fund has 18.5% involvement in fossil fuels, surpassing 15.2% for the average peer in its category, and exhibits high exposure of 13.54% to other firms with severe controversies.
ACS World ESG Insights Equity Fund
Launched in April 2021, this £7.9 billion fund experienced its best year of performance in 2023, returning 16.5%, just slightly shy of the FTSE World Index Developed benchmark, which saw a return of 16.6%.
However, the fund did not fare well in its first full reporting year, with it suffering underperformance of –8.24% in 2022. The benchmark lost -7.8%.
The fund's top holding is Microsoft (MSFT) at 5.52% of the fund, swiftly followed by Apple (APPL) and Nvidia (NVDA), which are held at 4.99% and 2.47%, respectively.
