A year hyped as the start of a great rotation from bonds into equities actually saw more of a trickle out of fixed income, but it was not plain sailing for bond funds.
Equities had a better time of it, hitting record peaks (though not when adjusted for inflation), with the US leading the way as the world’s largest economy finally flexed its muscles and produced some decent growth figures.
UK plc followed suit, with the FTSE 100 climbing 14% year to date, although this was some way behind the US, where the S&P 500 and the Dow climbed 24% and 28% respectively, in spite of a December dip as some of the froth came off the market.
Although there has been no great exodus from fixed income funds, the sector has had a much tougher 2013, with the US's move towards tapering and the paltry yields on offer prompting investors to look elsewhere.
Data from Morningstar shows the average strategic bond fund has delivered just 2.8% this year (to 6 December) while UK gilt funds have made a loss after yields blew out from their lows.
However, to make the best returns, investors ultimately had to look further afield this year to a country that has stolen many of the headlines.
Returning Prime Minister Shinzo Abe and his ‘Abenomics’ policies have spurred Japan’s equity markets throughout 2013, to send the region powering ahead of counterparts in Asia and the West.
With sharp moves upwards in both Japan and the US, it is the smaller and more volatile companies which have had the most success, rewarding the more adventurous investors.
The tiny Japanese Smaller Companies sector is the best performer of the year, with the average fund up 34% – although within this there is a wide degree of variation, with the best fund up 55% and the worst up around 25%.
But the best IMA-listed fund of the year came from an unlikely place.
The £7m Guinness Alternative Energy fund has achieved a staggering 67% return year to date, with its plays on wind and solar power coming into their own in 2013.
As developing nations including China look for alternative energy sources because of a shortage of their own fossil fuels, and with the US also making steps to become greener, alternative energy company shares have rocketed this year.
Elsewhere, a painful correction in metals prices early in the year – driven in part by concerns over China’s slowing growth – is yet to be reversed, with many commodities sliding throughout 2013.
As a result, nine of the top ten worst performing funds of the year invest in commodities of some kind.
Below are the top ten funds across the IMA universe, and the worst of the bunch, in 2013.
Top and bottom 10 funds of 2013
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