Dollar strength has led to investors embracing global and technology funds, writes interactive investor's Rebecca O'Keeffe who reveals which funds investors were buying last month.
Developed markets, in particular the US, had a very successful August, benefitting investors who are invested in global funds and those with exposure to some of the big technology giants.
In the US, markets appear impervious to the damage being inflicted by President Trump on the rest of the global economy. The imposition of tariffs on a growing number of countries around the world is perceived to cause no adverse risks for US assets. Quite the contrary, the US dollar is seen as a haven, resulting in dollar strength and weakness among other traditional safe-haven assets.
However, while the US is soaring ahead, the combination of gradual Fed tightening and downside risks to global growth and trade flows caused emerging market currencies to suffer in August, with many of their bond and equity markets following suit.
The increasing divergence between the performance of the US versus other economies may be causing some to worry about how long the party can last for US investors, but for the moment investors who are putting their faith in US stocks and shunning emerging markets are getting it right.
At some point emerging markets may become more attractive to investors, but for the moment investors are happy to steer clear.
Changes to most-popular funds
The Top 5 July fund favourites all maintained their spots in the August table, with the top 4 funds being unconstrained active managers. Fundsmith Equity has topped the table since early 2016 and despite its mammoth £18 billion size, it shows no sign of slowing down.
Lindsell Train Global Equity also remains hugely popular with the fund maintaining a first quartile performance rating over the short and long term.
The strongest performer in the table is the Baillie Gifford American fund, which sits in third place in the top 10; it has returned 47.8% over the past year and 146.5% over three years. The fund has enjoyed the strong run in the US stockmarket, which continues to hit new highs, on what is now its longest ever bull run.
Three of the 10 most popular funds are from the Vanguard LifeStrategy range of ready-made investment portfolios. Their diversified approach and low cost make them very attractive to price-conscious investors.
Making an appearance in the Top 10 for the first time is the SDL UK Buffettology Fund. Managed by Keith Ashworth-Lord of Sanford DeLand Asset Management, the fund - as its name suggests, champions the approach of Warren Buffett and is a standout performer in the UK all companies sector, returning 23.7% over one year compared to the sector average of 6.2%. Investors who have been avoiding UK funds in general have started to take notice.”
Most-popular funds bought in August 2018 on interactive investor
|Rank||Fund||IA sector||Previous Rank*|
|2||Lindsell Train Global Equity||Global||2|
|3||Baillie Gifford American||North American||3|
|4||Baillie Gifford Global Discovery||Global||4|
|5||Vanguard LifeStrategy 80% Equity||Mixed Investment 40%-85% Shares||5|
|6||AXA Global Technology||Technology & Telecommunications||9|
|7||Vanguard LifeStrategy 60% Equity||Mixed Investment 40%-85% Shares||New Entry|
|8||Vanguard LifeStrategy 100% Equity||Global||8|
|9||SDL UK Buffettology||UK All Companies||New Entry|
|10||Standard Life Global Smaller Companies||Global||7|
Source: interactive investor, 3 September 2018. Shows most bought funds by interactive investor's customers in August 2018. * July 2018
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