Top ten most popular funds

With 2016 already a challenging year, Jason Hollands reveals where Bestinvest’s clients invested in February

Top ten most popular funds

There’s no doubt that 2016 has started out as a challenging year for investors. There have been plenty of things to worry about: the slowdown in China and the potential impact of a slide in the value of its currency, the alarm caused by the move to negative interest rates in Japan, the solvency of European banks, the commodity rout, “Brexit” and soon, no doubt, the surreal prospect of “President Trump”.

Yet life goes on it seems from a quick look at the ten most popular funds (excluding our own ready-made portfolios) chosen last month by self-directed investors who use the Bestinvest Online Investment Service.

Instead of Gold ETFs or absolute return funds dominating the inflows, those clients who’ve been getting on with the annual business of picking funds for their ISAs and SIPPs continue to largely favour equity funds, mostly run by very long-in-the-t00th fund managers with many years-experience picking stocks.

The top ten funds purchased through our Online Investment Service in February were:

  1. Woodford Equity Income

Once again, the Woodford Equity Income fund tops our monthly list of most popular funds. At a time of heightened volatility in the equity markets, investors continue to flock to an experienced hand. Woodford’s fondness for tobacco companies has paid off well recently with the newly re-named Imperial Brands (formerly Imperial Tobacco) delivering consensus beating earnings in its recent trading statement.

The fund also has large holdings in British American Tobacco and Reynolds American – British American Tobacco recently took a large stake in Reynolds and many expect this to be a precursor to a full bid.

  1. Fundsmith Equity

Former City heavy weight Terry Smith has built his reputation on his straight-talking, no nonsense approach, and this was reflected in his recent comments that the UK would have “a much better future” outside of the European Union. He believes that a potential Brexit won’t have any effect at all on his Fundsmith Equity portfolio, saying that the companies within the fund are generally of the view that it would be “sad” for the UK to exit, but will make no difference whatsoever.

The fund invests in equities globally, and is currently split 57.8% to US companies and 24.8% to UK. Top contributions came from Intercontinental Hotels and medical technology developer C.R. Bard, while the top detractors were Newcastle-based Sage and Swiss food company Nestle.

  1. Threadneedle UK Equity Income

Richard Colwell’s Threadneedle UK Equity Income fund has long held a five-star rating from our research team and is consistently popular with clients. Colwell’s approach focuses on unloved companies that present value opportunities like GlaxoSmithKline and WM Morrison. He is however pragmatic in his approach and will occasionally invest in lower yielding, or even non-dividend paying companies where he sees a catalyst for change.

  1. Threadneedle European Select

The announcement by ECB President Mario Draghi that the central bank still retains the right tools to counteract deflationary pressures will have been greeted well by investors who have so far been positive on European equities in 2016.

Manager Dave Dudding sticks to big global brands. Summarising his investment philosophy in the Telegraph last year, he said: “People tend to buy the same shampoo and beer, so these are two fantastic businesses to buy and hold.”

Clearly one to both walk-the-walk and talk-the-talk, two of his largest holdings are AB InBev, the world’s largest brewer, and cosmetic company L’Oréal.

  1. HSBC American Index

The US stock market has historically proven very tough for active managers to beat, with even the “Sage of Omaha” Warren Buffet famously recommending low-cost trackers as the best way to access the market. The HSBC American Index has a low ongoing-charges figure of just 0.08% and replicates the S&P 500 index.

  1. Stewart Investors Asia Pacific Leaders

Asian markets found a degree of stability in February after what was a tumultuous January, and as a result this perennially popular fund performed well, returning 3.57%. It is very underweight China (1.2%) and instead has a major position in India (24%).

  1. Liontrust Special Situations

Fund managers Anthony Cross and Julian Fosh have worked together since 2008, and in that time have turned Liontrust Special Situations into one of the best performing funds within the UK All Companies sector, with a top quartile ranking over the last 5 years.

Some of the top holdings include Anglo-Dutch consumer goods company Unilever, whose brands include Dove, Ben & Jerry’s and Marmite, and alcoholic beverage producer Diageo, who manufacture Smirnoff, the world’s best-selling vodka, and Guinness, the world’s best-selling stout.

  1. Legg Mason IF Japan Equity

Unlike other Asian equity markets, Japanese equity markets continued to slide in February thanks to poor economic growth and the weak price of commodities. This aggressively managed fund, run by Hideo Shiozumi, has outperformed its TOPIX benchmark by 3.6% over the last month. Around 33% of the fund is weighted towards healthcare, with top holdings including Japanese healthcare firms M3 Inc. and Peptidream Inc.

  1. AXA Framlington UK Select Opportunities

With over 28 years of experience, Nigel Thomas is one of the most experienced fund managers within the UK All Companies sector. His UK Select Opportunities fund is relatively concentrated at 67 holdings, and top holdings include consumer brands Betfair, ITV and Dixons Carphone. Compared to its FTSE All-Share benchmark, the fund is heavily underweight financials and consumer goods, while overweight industrials and consumer services.

  1. Henderson UK Property

This fund invests in high quality commercial properties with strong tenants on long leases. Around 27.5% of the fund is exposed to retail outlets, with big names like Sainsbury’s, B&Q and Tesco providing steady income to the fund.

Some 58% of the exposure is to London and the South East of England, with some of the top properties held by the fund being 440 Strand, the home of Coutts bank, and 169 Union Street in Southwark, the home of the London Fire Brigade. Joint fund managers Ainslie McLennan and Marcus Langlands Pearse have recently started looking to add ‘alternative properties’ to the fund, such as student accommodation.

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