The Alger Focus Equity fund posted a return over the year of 56.3%, while another of its strategies, the $564m Alger American Asset Growth fund, was up 52.39%.

While surging share prices in Nvidia and other US tech stocks on the back of AI have been among the largest contributors to performance over the last year, the Alger American Asset Growth fund is one of the few actively-managed funds to beat the S&P 500 over a 10-year period.

See also: Yearsley: Financials ‘surprise winner’ of 2024

Speaking to Portfolio Adviser, Alger CEO and CIO Dan Chung says that the firm’s long-term performance is down to a lot more than just holding Nvidia.

Chung is a named manager alongside Dr Ankur Crawford and Patrick Kelly on Alger American Asset Growth, while Crawford and Kelly also run the Alger Focus Equity fund.

“Over a long-term period, its not about a single stock. It’s hundreds of decisions every year, and sometimes the decision is not to sell,” Chung says.

“We were early in Nvidia, buying in 2022. After 2023 saw a spectacular rise in the stock, a lot of people were saying that it must be time to sell, without carefully understanding the fundamentals of the business and how early on we are in the AI revolution. Our biggest and best decision was not to sell any of our Nvidia stock at that time, and it remains a top holding.

“Over the longer term, the success of the strategy has been a relentless focus on the depth and the quality of our team. 60 investment professionals for a firm of our size is actually quite a lot.

“We have a concentration of analysts that is probably 2-3 times more than a lot of our competitors.”

See also: Artemis merges European funds

The firm’s investment approach seeks to benefit from what Chung labels ‘positive dynamic change’. Reviewing the performance of the Alger American Asset Growth strategy over the last 10 years, in which it has posted a 430.8% return (as of 7 January), he says it has been a period of immense change.

“That period started with coming out of the great financial crisis, before entering into the most radical changes in American politics in decades.

“Our relentless focus on our philosophy of positive dynamic change – it means that culturally, as an investment firm, we’re very focused on embracing change. Don’t be afraid of disruption, innovation and volatility. Instead, we look at it as an opportunity to look for the positives that come out of these changes.

“The world is changing faster. There is more innovation and more disruption, which means winners and losers are created faster than they were in the past.

“It’s a highly competitive game. It requires people, but it also requires that right philosophy and mindset.”

European growth

The New York-based boutique is a growth equity specialist, and though it is better known back at home, the firm is looking to expand its offerings in Europe.

“We only have about 5% of our clients internationally — we have a two-person office here in London and a one-person office in Singapore, and we’re trying to grow in both regions.”

“We have been interested in talking with European asset managers in a similar situation, whether we can partner to help them grow in the US, and help Alger grow over here.

“There are some very obvious advantages for a European asset manager to consider partnering with a firm like Alger. We can offer significant US distribution. I’ve met many firms here that are actually quite large and don’t really have any US distribution, and we don’t have significant European distribution. The opportunity is pretty large.”

Industry M&A

The firm, founded in 1964 by Fred Alger, recently celebrated its 60th anniversary.

Industry M&A has seen many boutique firms in both the US and Europe swallowed up by larger asset managers.

However, Chung says that this trend has led to the unique selling points of larger asset managers becoming distorted, which can be exploited by existing boutiques.

“We’ve been taking advantage of the industry structure right now. In traditional asset management, you have a few global giants, and then you have a lot of very big companies just outside of the top 10.

“A lot of them have been created out of multiple mergers. The challenge there is that they don’t have the distribution scale of the largest names, and because they’ve been created out of mergers, a lot of them are like supermarkets. They offer everything, but they’ve lost a little bit of what they are best at.

“They all originally had something that they were really good at, whether it was bonds, equities or real estate, but now that they’ve become these large ‘supermarkets’ – they’re trying to compete with the Costco’s and the Tesco’s.

“They have a lot of challenges because it’s hard for them to grow as they’re large already. Their cultures are just within the team of the investing, and they’re not necessarily particularly known to be particularly at any one thing.”

The sector was closely tailed by technology and technology innovation at 24%, and North America with an average 22.2%, with the Magnificent Seven remaining at the top of mind for investors. The five leading sectors were rounded out with India returning 17.7% and China at 14.1%, despite a negative outlook for much of the year before interest rate and policy announcements last autumn. However, challenges for China could remain on the horizon for 2025 as Donald Trump’s plans for tariff policies crystallise.

See also: Is China at a turning point, or will it disappoint yet again?

Ben Yearsley, director of Fairview Investing Limited, said: “2024 was the year of global democracy with the greatest number of people ever going to the polls – 2025 promises more stability. It was a fascinating year with Donald Trump’s re-election surely the key focus for investors in the next few years. ‘Will he, won’t he’ on tariffs could shape markets for the foreseeable future.

“From a sector perspective Financials & Financial Innovation was arguably the surprise winner. Then again banks, for example, have been throwing off cash like it’s going out of fashion using it to fund dividends and buybacks.”

While the best-performing sectors battled for the top spot, Latin America emerged as the clear underperformer for 2024, losing 25%.

“Argentina’s much derided president Milei has actually put the country’s finances on a much more even keel with his policies leading to a fall in monthly inflation from 25% a year ago to 2.4% now,” Yearsley said.

“Unfortunately, Brazil is now in the eye of the storm with the Bovespa down last year and the Real losing 23% versus the greenback.”  

UK Index Linked Gilts was the second-worst performer, at a 9.7% loss, followed by UK Gilts, global EM bonds local currency, and EU government bonds.

“Government bonds had a poor year with four government bond sectors in the bottom five – fiscal rules apply to governments as well as companies,” Yearsley said.

“Interestingly it was the perceived high risk bonds that performed well again in 2024 with the Sterling High Yield sector delivering 8.73% versus a fall of almost 10% for the UK Index Linked Gilt sector.”

By individual fund, three produced returns above 50% for the year, led by Alger Focus Equity at 56.3%. JPM Emerging Europe Equity followed with 53.88% and Alger American Asset Growth returned 52.39%. Almost all of the top 10 performers were US-focused funds.

See also: The undervalued markets where managers are diversifying away from the US

“Aside from JPM’s Emerging Europe Equity fund which has had a resurgence in the hope of President Trump forcing a resolution on Ukraine and Russia, the top 10 last year was all about the US; even global funds like Aubrey are 75% US invested,” Yearsley said.

“It wasn’t just AI but clearly that was a key driver of returns last year. Can these companies live up to their valuations and deliver expectation beating earnings this year? As ever L&Gs Technology Index fund outshone all other tech funds as well as beating the Nasdaq – all for an OCF of 0.32%.”

The worst-performing funds were almost entirely made up of renewable energy and Latin America funds, with the exception of SJP Property, which lost 25.1%. Active Solar fell 34.2% in the year, followed by Blackrock GF Latin America and HSBC Brazil Equity.

“It doesn’t pay to be clean and green currently. With President Trump more interested in oil and gas and the Chinese still flooding the solar markets where will the catalyst come from to turn these funds? Maybe these funds need to tap into Ed Millipede’s largess and grab some of the near £40bn he wants to spend on decarbonising the UK power network,” Yearsley said.

“Active Solar propped the tables falling 34% after also featuring in the bottom ten for 2023. When will the sun shine on this sector?”