Which Isa fund sectors perform best?

Funds and Investment Trusts February 22, 2018 by Rachel Lacey

China and smaller companies have offered investors in stocks and shares individual savings accounts (Isa) the highest returns since the tax-free savings wrappers were launched on 6 April 1999.

According to analysis from multi-manager investment firm, Architas, Isa investments in China and Greater China have enjoyed the highest growth of 824 per cent.

Strong performance in this sector reflects rapid economic growth in the region since the start of the new millennium. Although Chinese markets traded ‘sideways’, for a period after the financial crisis, that is with no significant movement up or down, it has rallied since 2016 as the country transitions from being a major exporter to a specialist in technology an innovation.

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However, overall sectors that specialised in smaller companies dominated the top 10.  Behind China came European Smaller Companies, which have given Isa investors a return of 639 per cent since 6 April 1999, followed by UK Smaller Companies which have returned 557 per cent. North American Smaller Companies came in at number six, with a return of 406 per cent and Japanese Smaller Companies at number nine with gains of 317 per cent.

Other sectors to feature in the top 10 were Asia Pacific ex Japan, Global Emerging Markets, Global Emerging Markets Bonds and Specialist – which comprises very niche funds that cannot be accommodated in other sectors. 

When Architas examined which individual funds had performed best since Isas were launched, it was also UK smaller companies that came out on top. Marlborough Special Situations was the strongest performer by a significant margin, giving investors a return of 2,600 per cent. Artemis UK Smaller Companies came in second at 1505 per cent.

Adrian Lowcock, investment director at Architas says : ‘Markets have been anything other than normal in the years since Isas were launched, which is pretty much in keeping with any other period in history. The backdrop to investing is always changing and makes it hard to predict where the stock market returns might be over the next 20 years.’

‘The data shows the importance of being diversified as well as having the right funds in your portfolio. Whilst passive investing has been a good strategy following the financial crisis there are still areas which benefit from active management, including smaller companies, Asia and emerging markets.’

This article was originally written by our sister publication Moneywise.

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