HL Growth Fund Performance Update - Second Quarter of 2024

The HL Growth Fund is our default fund for workplace pensions. It’s where your monthly pension contributions are invested if you haven’t made your own investment decisions.

For a closer look at the HL Growth Fund, you can explore our interactive guide.

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. Past performance is not a guide to future returns.

We hope this update helps you understand how the stock markets affect the value of your pension investments.

Quarter review - 1 April to 30 June 2024

The second quarter was a busy one. Taylor Swift made it to the Forbes Billionaires list for the first time, the UK went to the polls (and got a new prime minister). Biden’s re-election campaign was thrown into chaos after a disastrous TV debate with Donald Trump, who was also convicted of 34 felony counts in the same period.

In the investment world, things looked more settled. The HL Growth Fund grew by 2.4%*. To help you assess how successful the fund has been, we compare its performance to a group of funds which have a similar investment mix, represented by the ‘IA Mixed Investment 40-85% Shares Sector’. This is the fund’s benchmark for comparison purposes. The benchmark delivered a return of 1.7%*, which means the HL Growth Fund compared favourably over the period.

The HL Growth Fund invests into a mix of two asset types, shares and bonds. Shares are higher risk but give potential for greater returns over the long term. Bonds tend to experience less ups and downs, but generally offer lower long-term returns.

Over the second quarter, shares outperformed bonds, and were the area of the fund responsible for most of its growth.

Markets overseas

The global stock market grew by 2.9%*. Shares in the Asia-Pacific Region performed the strongest overall. The Chinese stock market - included in this region - did well after a period of underperformance, and the Taiwanese stock market also helped drive gains. This is thanks in part to a rapidly growing technology sector in the country, which is enjoying a period of high demand globally.

Despite delivering a lower return than shares in the Asia-Pacific Region, the American stock market contributed the most to overall stock market growth. This is because the USA makes up over 64% of the entire global market, so it has a greater impact on its return. The US market grew by 4.2%*.

The catalyst for growth in American (and global) shares is largely thanks to huge growth in the technology sector. In fact, much of the growth can be attributed to just a small number of companies. Nvidia, Microsoft, Alphabet (Google), and Amazon contributed more than half of the gain of the American stock market over the first half of the year.

The common theme between them is a heavy involvement in Artificial Intelligence technology. Nvidia manufacture critical microchips which the technology relies on, while the other three have the potential to use their market-leading status to capitalise on the opportunity AI offers.

Markets in the UK

Closer to home, the UK stock market also performed well, up 3.7%*. Larger companies performed slightly better than small and mid-sized ones, although the margin was small. Performance of smaller and mid-sized companies is seen as an indicator of the health of the UK economy, while performance of the larger companies is a better reflection of global conditions, as well as how the pound sterling performed versus other major world currencies, like the US dollar.

The UK fell into a mild and short recession at the end of 2023. But data released in the second quarter of this year showed that the economy exited recession and grew in the early stages of 2024.

A positive global picture, good news on the economic front and a general election outcome which was widely anticipated all contributed to the growth of the UK stock market.

Looking ahead

As we go into the second half of 2024, investors will be keeping a close eye on how central banks manage interest rates.

Investors are hoping for cuts to central bank base rates, which can help to boost the economy. Central bankers on the other hand will be watching the economic data carefully. They are fearful of cutting interest rates while the economy is doing well, which could lead to further inflation. It’s a fine balancing act, and investors are always trying to anticipate the central banks’ next moves.

The Bank of England has already made one interest rate cut this year – from 5.25% to 5% in August. And as the latest US data has shown a large rise in unemployment, calls are growing for the US Federal Reserve to make a rate cut sooner rather than later.

After a fantastic first half, the stock market narrative appears to be changing too. It’s too early to say if this is the early signs of a broader shift in sentiment or something more transient. But we’ve already seen the dominance of a small number of tech-focused businesses reverse significantly in July and August. The shares of companies in the IT sector globally fell by almost 4%* in July alone.

Some of the world’s most influential investors are feeling cautious about the outlook too. Markets have reacted poorly to the latest US data, as it raises the possibility of recession in the future.

Sadly, we can’t see the future. And past performance is no guide to future returns – particularly over such short periods as those discussed here. But we do know that maintaining a broad spread of investments can reduce the risk of investing. In July, bonds outperformed shares as investors looked for some shelter from stock market turbulence.

The HL Growth Fund holds approximately £1 of every £5 you invest in lower risk investments, like bonds. Investments of this type have the potential to perform well if the stock markets fall further, although that’s not guaranteed.

*Source: Lipper IM, 30 June 2024. Figures 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.