With no change in the top six rankings over the month of July, Money Observer Rated Fund Fundsmith Equity was once again the most popular fund with clients of our sister website Interactive Investor. With over half of its assets in US equities, and 18.8 per cent in UK equities, this fund is managed by the highly regarded Terry Smith.
Rebecca O’Keeffe, head of investment at Interactive Investor, says: ‘Fundsmith Equity was the most bought fund yet again, topping the chart as it has done in every month since January 2016. Fears that the behemoth fund would suffer from a weaker dollar have been unfounded, as the US equity market hitting new highs offset any negative currency impact.
‘The long-term buy and hold approach Terry Smith has taken has certainly delivered for investors, with the fund doubling in value over just three years. Exposure to consumer staples, healthcare and technology has paid off very well for the fund; there is currently nothing to suggest that it will lose its appeal for investors and it seems likely to remain in the top spot while equity markets continue to reach for the skies.’
Second on the list of most-bought funds was Money Observer Rated Fund Lindsell Train Global Equity. Jointly managed by Michael Lindsell and Nick Train, the fund returned 17.4 per cent over six months and 19.8 per cent over one year.
Neil Woodford's eponymous open-ended fund – CF Woodford Equity Income – took third place. But while it was the second most popular fund in July, Woodford Equity Income was also one of the ten worst performing funds in the Investment Association’s sectors over the month, when it lost 2.5 per cent.
Last month was a shocker for Woodford with the top three positions all falling sharply during the month, for different reasons. Astra Zeneca's latest drug trials disappointed, Imperial Brands was hit when the Food and Drug Administration in the US decided to reduce the amount of nicotine in cigarettes and Provident Financial plunged after first half profits disappointed,’ says Ben Yearsley, director at Shore Financial Planning.
He adds: ‘Neil Woodford is an excellent fund manager, but even he will have periods of poor performance sometimes. Last month showed the benefits of not having too many eggs in a single basket, and also that today's markets savagely punish perceived poor results.’
Woodford hopes that sectors such as biotech will eventually pay off.
It is worth pointing out that half of the top 10 most-bought funds were passive ones, which indicates a wider trend to opt for low-cost tracker funds.
The fourth place in the list was taken by passive fund Vanguard LifeStrategy 80% Equity, which focuses on US, UK and European ex UK equities as well as global bonds. The fifth spot was taken by another passive fund, Vanguard LifeStrategy 100% Equity, which gained 7 per cent over six months.
It was closely followed by Jupiter India in the sixth spot, which gained 15.1 per cent over the last six months and an astonishing 103.1 per cent over the last three years. The ongoing tax reforms are seen as a positive development for the Indian economy.
Artemis Global Income went up by one place, to seventh most-bought fund in July. It benefits from a global spread as one third of its holdings are in US equities, 15 per cent in Italian equities and 6.2 per cent in UK equities. ‘The fund is value-focused, and so benefited from better performance at the end of 2016, but this has reversed this year,’ says Fund Expert’s Brian Dennehy.
‘Growth has come from big tech companies in the US, which the manager cannot hold as they don’t pay dividends. Given the strong run these already expensive stocks have enjoyed, the manager is cautious on the outlook for the remainder pf 2017.’
Over the last six months to the start of August Artemis Global Income returned 4.4 per cent against the global equity income average of 6.2 per cent, putting it in the third quartile. However, it outperformed the sector over the month of July.
The Artemis fund was closely followed by passive fund Vanguard LifeStrategy 60% Equity, which has 26.3 per cent in US equities, 19.4 per cent in global bonds, and 15 per cent in UK equities.
HSBC FTSE All Share Index, which took ninth spot, gained 6.5 per cent over six months. And finally, the tenth spot was taken by Vanguard FTSE Developed World ex UK, which has 61 per cent in US equities and 9.9 per cent in Japanese equities.
‘The policy of putting your name on it is working out for our top three fund managers, with Fundsmith, Woodford Equity and Lindsell Train retaining the top three most traded fund spots yet again. Although the march to passive funds appears somewhat relentless, investors are still expressing a preference for good actively managed funds which can deliver outperformance,’ comments O’Keeffe.
July's top 10 most popular investment funds
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