HL Growth Fund Performance Update – Fourth Quarter of 2024
In this update, we look back at key events impacting the stock market, and how the HL Growth Fund performed between 1 October to 31 December 2024, as well as over longer time periods.
Last Updated: 6 January 2025
The HL Growth Fund is our ‘default fund’ for workplace pensions. It’s likely to be where your monthly pension contributions are invested if you haven’t made your own investment decisions.
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Remember that investing is for the long term, and your pension is typically invested over many years or even decades. You shouldn’t base your investment decisions on short-term events.
This update will help you understand how the stock markets affect the value of your pension investments.
Quarter review – 1 October to 31 December 2024
As we bid farewell to 2024, the final months were dominated by political events. From the seismic impact of the US election to South Korea’s dramatic impeachment of two leaders within as many weeks. And from the unexpected dissolution of Germany’s parliament and the UK’s pivotal Budget, investors faced a mix of challenges and opportunities.
During the period, the HL Growth Fund grew by 3.5%*, contributing to a strong 12-month return of 14.5%*.
To assess the fund’s performance, we benchmark it for comparison purposes against a group of funds with a similar investment mix, represented by the ‘IA Mixed Investment 40-85% Shares Sector’. The sector on average delivered a return of 1.1%* over the same time period and a 1-year return of 8.9%. The HL Growth Fund outperformed its benchmark for the eighth consecutive quarter. Past performance isn’t a guide to the future.
The HL Growth Fund invests into a mix of two asset types: shares and bonds. Shares are higher risk but offer greater potential returns over the long term. Bonds tend to experience less ups and downs, but generally offer lower long-term returns.
Over the fourth quarter, despite the seemingly uncertain political backdrop, the performance of global shares had the biggest positive impact on the fund’s performance. Investing into bonds detracted from the fund’s return, albeit by a modest amount. In the third quarter, bonds were the main driver of the fund’s performance, which serves as an important reminder that a well-diversified investment is key to long-term investment success.
Let’s take a closer look at how different investments within the fund performed.
Stock markets
To diversify, the HL Growth Fund invests globally, including in higher-risk emerging markets and smaller companies. So how overseas stock markets perform is significant for the fund. The fund also invests a relatively high amount in the UK market too.
This quarter, it was larger companies that delivered stronger returns compared to smaller ones (although the latter still did well), and those listed in the US performed particularly strongly. Donald Trump’s election victory was decisive, and markets acted positively as fears of a contested outcome disappeared. A clear win also built investor conviction around which areas of the economy could benefit most under 'Trump 2.0'. Companies in Technology, Communication Services, Banking and Retailers of more discretionary goods all played a role in driving markets higher.
Outside of the US, it wasn’t quite such smooth sailing. Although investments in Japan contributed a small amount to the fund’s returns following corporate developments, investments in the UK, Europe and Emerging Markets all detracted.
In the case of the UK, the market fell as investors mulled higher taxes and borrowing announced in Labour’s first Budget. Medium and smaller-sized companies are more sensitive to the domestic economy and were most affected as a result.
In Europe, some countries enjoyed strong gains, but many fell for a variety of reasons. As one of the larger markets, France was a notable faller: the market lost nearly 4% as investors were rattled by the ousting of Prime Minister Barnier following his controversial plans to cut the government’s budget. But the French were not alone in facing political challenges. Germany also endured the collapse of its government, although that didn’t prevent their stock market from growing slightly.
The Emerging Market stock index fell over the fourth quarter, and our investments in these markets were the largest detractor from the fund. The biggest headline grabber came from South Korea, where the market was hit hard by the dramatic imposition of martial law, the impeachment of its president and the chaos that followed. China also showed weakness in response to Trump’s re-election, as tariff threats came one step closer to reality. Brazil's market struggled due to concerns over government spending and debt, falling over 15% over the period.
Despite many regions suffering from negative returns over the fourth quarter, the sheer size and strength of the US market meant that shares performed well overall. That is, the gains in the US more than offset falls elsewhere.
Bond markets
Bonds had a relatively quiet quarter, although the global market fell overall. UK government bonds (issued by the government to fund their general expenditure) performed poorly and suffered larger losses than the broader market. Those with long terms until maturity (the point at which the government pay back the original loan amount) were particularly impacted, as they are more sensitive to interest rates and inflation, which markets are not now expecting to fall as quickly as previously hoped. The additional borrowing announced in the Budget also led to a drop in gilt values. This is because if markets believe there's a higher risk that the UK may struggle to repay its debt in the future, the perceived risk of lending money to the country increases, which lowers the value of its bonds.
Looking ahead
As the new year gets underway, all eyes are on Donald Trump’s second term, with markets poised to react swiftly to whether his bold pre-election promises translate into real action. Key areas to watch include tax reforms, deregulation, and trade policy, all of which could set the tone for global market momentum in 2025. Ongoing global conflicts continue to exert a heavy toll on a humanitarian level, as well as acting as a destabilising force on markets. So investors will also be hoping for their swift resolution in 2025, and hoping inflationary forces give way to a period of economic growth and recovery.
3 Months | 6 Months | 1 Year | 3 Years | 5 Years | Since Launch* | |
---|---|---|---|---|---|---|
HL Growth Fund | 3.5% | 5.6% | 14.5% | 14.5% | N/A | 15.7% |
Comparator | 1.2% | 2.9% | 9.0% | 6.0% | 24.0% | 6.9% |
Dec 19 To Dec 20 | Dec 20 To Dec 21 | Dec 21 To Dec 22 | Dec 22 To Dec 23 | Dec 23 To Dec 24 | ||
HL Growth Fund | N/A* | N/A* | -11.1% | 12.4% | 14.5% | |
Comparator | 5.2% | 11.2% | -10.1% | 8.1% | 9.0% |
Past performance is not a guide to the future. The comparator is the IA Mixed Investment 40-85% Shares TR.
*The HL Growth Fund launched on 15 December 2021. N/A means full year figures are unavailable. Source: Lipper IM, to 31 December 2024.
Unless stated otherwise, figures are expressed in GBP terms, to show the returns experienced from the perspective of a UK investor.
Important notes
Investing for longer increases the likelihood of positive returns. Over a period of five years or more, investments usually give you a higher return compared to cash savings. But investments can go down as well as up in value, so you could get back less than you put in.
Once invested in a pension, your money is usually no longer accessible until at least age 55, rising to 57 in 2028.
The HL Growth Fund is managed by Hargreaves Lansdown Fund Managers Ltd, a subsidiary of Hargreaves Lansdown Plc.