Appetite for UK equity wanes as active strategies resurge in the top 10 most-bought funds in April.
Sentiment towards the UK stock market waned among interactive investor customers in April, as funds with a UK focus slipped off the top 10 fund purchases list on the platform – down from four in March.
Passive funds Vanguard FTSE UK All Share Index, HSBC FTSE 100 Index, Fidelity Index UK Fund and Vanguard FTSE 100 Index Unit Trust have all exited the table in what was a tumultuous month for the UK stock market.
Dzmitry Lipski, ii's Head of Fund Research, says: “It is interesting to see that funds with a UK focus have slipped off the top 10 most-purchased funds list. There has been a rally in global markets since the sharp market downturn in late February owing to Covid-19, but the UK market has not risen at the same pace as the US, for example. This is largely because the US stock market is packed with tech stocks that have performed well in recent history, while the FTSE 100 has suffered from the poor performances of services, commodity and oil stocks which make up a significant percentage of the index.
“Active managers earn their corn by attempting to beat their benchmark market index by cherry-picking stocks and making the call to stick or twist to take advantage of perceived inefficiencies in the market. The current market environment offers them the opportunity to do exactly this, and customers of interactive investor have flocked to some of the most renowned actively managed solutions in the industry, with Fundsmith Equity and Scottish Mortgage investment trust (LSE:SMT) in a familiar position at the top of the table. In truth, our most successful investors have a blend of active and passive strategies with their well-diversified portfolio.”
There was a renewed appetite for actively managed funds in April, accounting for half of the top 10 list of most-bought funds on interactive investor.
While Fundsmith Equity and Vanguard LifeStrategy 80% Equity remain in the top two spots respectively, four new entries in the line-up are all actively managed funds.
Entering the list in fifth place is the Baillie Gifford American, with L&G Global Technology Index, Polar Capital Global Technology and Baillie Gifford Global Discovery taking the seventh, ninth and tenth spots, respectively. Interestingly, there were no tech funds in March, with the appearance of two tech funds in April.
Meanwhile, Lindsell Train Global Equity, has climbed four positions to third, while Vanguard LifeStrategy 100% Equity has slipped three places to sixth and Vanguard US Equity Index fell by the same amount to eighth. Vanguard LifeStrategy 60% Equity remains rooted in fourth position.
It is more of the same when it comes to investment trusts, with only one new addition in April – Worldwide Healthcare in seventh position.
Scottish Mortgage remains rooted at the top of the table – boasting a record as the most purchased investment trust on the interactive investor platform month in, month out since February 2014, except once. Polar Capital Technology Trust has jumped five places into third, ahead of City of London (LSE:CTY) which slips down a place to third and Alliance Trust (LSE:ATST), another trust to have fallen down the rankings, but a single position in fourth.
Also in the rankings is Allianz Technology (LSE:ATT) which climbed five positions to fifth, Finsbury Growth & Income (LSE:FGT) which fell two places into sixth and F&C Investment Trust remains rooted in ninth. Monks makes the cut in 10th place, down from sixth in March.
There are three new entries in the list of top 10 most-bought direct equities.
Biotech firm Novacyt (LSE:NCYT), a widely popular stock among interactive investor customers since the coronavirus outbreak, has returned to the list in fourth position having missed out in March. Tullow Oil (LSE:TLW) and Avacta Group (LSE:AVCT) also make the cut in sixth and eight positions.
Keith Bowman, Equity Analyst at ii, says: “UK blue chips that pay a dividend are still highly sought after by our customers. But the choice of companies has narrowed dramatically as managements have moved to conserve cash amid the pandemic.
“Regulatory pressure on the banks to cancel their dividends and assist lending to customers has added further to the challenge. Income investors are still not out of the woods and the dividend drought might get worse before it gets better - it all hinges on how the pandemic plays out.”
Most-bought funds, investment trusts and equities on interactive investor in April 2020 (in rank order)
|FUNDSMITH EQUITY||SCOTTISH MORTGAGE||LLOYDS BANKING GROUP|
|VANGUARD LIFESTRATEGY 80% EQUITY||POLAR CAPITAL TECHNOLOGY TRUST||BARCLAYS|
|LINDSELL TRAIN GLOBAL EQUITY||CITY OF LONDON||BP|
|VANGUARD LIFESTRATEGY 60% EQUITY||ALLIANCE TRUST||NOVACYT|
|BAILLIE GIFFORD AMERICAN||ALLIANZ TECHNOLOGY||ROYAL DUTCH SHELL|
|VANGUARD LIFESTRATEGY 100% EQUITY||FINSBURY GROWTH & INCOME||TULLOW OIL|
|L&G GLOBAL TECHNOLOGY INDEX TRUST||WORLDWIDE HEALTHCARE||INTERNATIONAL AIRLINES GROUP|
|VANGUARD US EQUITY INDEX||SMITHSON||AVACTA GROUP|
|POLAR CAPITAL GLOBAL TECHNOLOGY||F&C INVESTMENT TRUST||AVIVA|
|BAILLIE GIFFORD GLOBAL DISCOVERY||MONKS||LEGAL & GENERAL|
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