Our list of 10 most popular funds is dominated by ‘star’ fund managers and tracker funds.
The stock market volatility during ‘Red October’ did not dampen investors’ appetite for passive funds.
Data provided by our sister website interactive investor, which looks at the most popular funds bought each month, shows that in October investors were “buying on the dip”, as the index trackers Vanguard LifeStrategy 80% Equity and Vanguard LifeStrategy 100% Equity both moved up the top 10 table, to third and fifth place respectively. Vanguard LifeStrategy 60% Equity is also in our most popular fund table, in seventh position.
The LifeStrategy range is hugely popular with self-directed investors who simply want to buy the market, rather than putting faith in an active fund manager to deliver superior returns. October provided an opportunity for them to get into the market at a more attractive level.
Their low cost also catches the eye, with each of the five funds in the range displaying an ongoing charge figure of 0.22% (though of course this does not include trading costs). In contrast, an actively managed multi-asset fund tends to charge between 1% and 1.25%. In some cases, particularly for multi-manager funds which buy funds rather than equities and bonds, the annual charge is even higher.
According to the Investment Association (IA), retail investors hold £194 billion in tracker funds – 15.4 per cent of the total invested. The amount held in trackers a decade ago was a mere £30 billion, which at the time represented 6 per cent of the total.
The rise of passive has not stopped investors looking for active fund managers who have earned their stripes over the years. Last month was no different, with customers of interactive investor continuing to back star fund manager names, including Terry Smith and Nick Train.
Fundsmith Equity fund, managed by Terry Smith, has regularly taken top spot since our most popular fund series began in 2014. His approach of buying big brand businesses that should in theory stand the test of time continues to reward the fund’s strong following, with £16.2 billion under management.
Train manages two funds in the top 10: Lindsell Train Global Equity (managed jointly with Michael Lindsell) and LF Lindsell Train UK Equity. The investment process used by Train across all of his funds is based on his conviction that inefficiencies exist in the valuation of exceptional quoted companies. These are the businesses he focuses on, seeking out cash-generative franchises that should in theory stand the test of time.
Elsewhere, two funds from Baillie Gifford’s stable appear in our top 10. Baillie Gifford American favours fast-growing tech companies (comprising 30% of the fund), while Baillie Gifford Global Discovery is focusing its sights on healthcare, which makes up 35% of the fund.
Over the past couple of years the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google’s Alphabet) have provided investors with returns way above the norm, as have a number of a number of rival Chinese technology firms.
But in October tech share prices fell heavily, reflecting pricey share price valuations after their rich vein of form. As a result, funds that favour technology suffered.
|Rank||Fund||IA sector||Change since September||*1 year (%)||*3 years (%)|
|2||Lindsell Train Global Equity||Global||--||15.4||77.3|
|3||Vanguard LifeStrategy 80% Equity||Mixed Investment 40%-85% Shares||+2||0.1||36.7|
|4||Baillie Gifford American||North America||--||25.1||106.6|
|5||Vanguard LifeStrategy 100% Equity||Global||+5||0.4||45|
|6||Baillie Gifford Global Discovery||Global||-3||22.3||85.2|
|7||Vanguard LifeStrategy 60% Equity||Mixed Investment 40%-85% Shares||--||-0.2||28.8|
|8||Janus Henderson Global Technology||Specialist||---||7.1||90.7|
|9||LF Lindsell Train UK Equity||UK all companies||New entry||3.3||37.3|
|10||CFP SDL UK Buffettology||UK all companies||-1||10.7||57.7|
Note: *Performance data is to 5 November 2018.