Passive funds are proving popular and now take up five of the top 10 spots in our most-bought league table.
Since the global financial crisis, passive funds have enjoyed a surge in popularity that shows no signs of cooling.
At the end of March, the amount held in tracker funds stood at £194 billion, which represents a 16.1% overall share of industry funds under management.
To put the rapid growth of passive funds over the past decade into context: in 2007, before the financial crisis, the amount held in trackers was a mere £29 billion, which at the time represented 6.3% of the total.
The continued popularity of passive funds is also evident in our list of the 10 most popular funds bought by clients of broker interactive investor, our parent company. In the month of April, the only new entrant was the passively managed Vanguard FTSE Developed World ex UK Equity Index fund. This takes the number of passive funds in the top 10 up to five. Exiting the top 10 is the actively managed Baillie Gifford American.
But in terms of overall popularity, Terry Smith’s Fundsmith Equity remains top of the tree, followed by Nick Train’s Lindsell Train Global Equity fund. Another fund managed by Train is in the fourth spot, Lindsell Train UK Equity.
There are various drivers behind the tracker fund sales boom over the past decade or so, but the fact that they have become much more popular since the financial crisis is not a coincidence.
During the crisis, from September 2007 to April 2009 the average fund in the IA UK all companies sector fell 40%, according to FE Trustnet, in line with the losses posted by both the FTSE 100 and FTSE All-Share indices.
But for some investors, the fact that active fund managers were not able to give a better account of themselves was enough to undermine their faith in active management.
- In our top 10 table, the most popular passive fund is Vanguard LifeStrategy 80% Equity, followed by Vanguard LifeStrategy 60% Equity and Vanguard LifeStrategy 100% Equity.
These funds are favoured in particular by cost-conscious investors, as the ongoing charge figure is just 0.22% (although this does not include the fund’s trading costs).
Also in the top 10 are Vanguard US Equity Index and Vanguard FTSE Developed World ex UK Equity Index. With ongoing charge figures of 0.1% and 0.15% respectively, these are two of the cheapest routes to gain exposure to US and global shares.
|Rank||Fund||IA sector||Change since March||*1 year (%)||*3 years (%)|
|2||Lindsell Train Global Equity||Global||--||25||95.3|
|3||Vanguard LifeStrategy 80% Equity||Mixed Investment 40%-85% Shares||--||6.8||40.8|
|4||Lindsell Train UK Equity||UK all companies||--||14.9||55|
|5||Vanguard LifeStrategy 60% Equity||Mixed Investment 40%-85% Shares||---||5.9||31.7|
|6||AXA Framlington Global Technology||Technology and telecommunications||+3||26.6||136.6|
|7||Vanguard LifeStrategy 100% Equity||Global||+1||7.6||50.4|
|8||Baillie Gifford Global Discovery||Global||+1||19.7||97.6|
|9||Vanguard US Equity Index||North America||+1||16.1||66.1|
|10||Vanguard FTSE Developed World ex UK Equity Index||Global||New entry||10.4||56.5|
Data correct as at close of trading on 4 May 2019.