Interactive Investor

20 best-performing funds since Junior ISA launched a decade ago

10th November 2021 10:12

Kyle Caldwell from interactive investor

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Parents who had the luck or foresight to pick one of the big winners have been handsomely rewarded.

The Junior ISA, a tax-efficient savings and investments wrapper for children, celebrated its 10th anniversary last week.

A Junior ISA is not just for contributions from parents, other family members such as grandparents, uncles and aunties, can also put money into the account. The Junior ISA itself is just a ‘wrapper’ protecting savings from tax.

There are two Junior ISA options: cash or stocks and shares. The rules allow mix and matching, and one of each can be opened.

However, parents tend to be overly cautious in favouring the cash version. The latest statistics show that in the 2018-19 tax year, money was put into 954,000 Junior ISAs, with 70% of those being cash ISAs and 30% stocks and shares ISAs.

As the money cannot be accessed until the child’s 18th birthday, parents risk being too cautious in favouring cash over stocks and shares. While there are no guarantees, history shows that this is an adequately long enough time period to ride out the peaks and troughs that are part of investing in the stock market.

Research from fund ratings agency FundCalibre reveals how parents who had the luck or foresight to pick one of the top 20 fund performers of the past decade have been handsomely rewarded.

The table below shows how much an initial investment of £3,600, which was the maximum contribution for a Junior ISA a decade ago, would have turned into. The current Junior ISA allowance is £9,000 a year.

Most - 17 of the top 20 performing funds - invest in the US or technology sectors.

Top of the class is Baillie Gifford American, which would have turned an initial investment of £3,600 into £36,284. 

The second and third best-performing funds were Morgan Stanley US Growth (£35,410) and Fidelity Global Technology (£30,365).  

Top 20 fund performers of past decade

Fund Turned £3,600 into...
Baillie Gifford American £36,284
Morgan Stanley US Growth £35,410
Fidelity Global Technology £30,365
Invesco EQQQ NASDAQ-100 ETF £29,861
iShares NASDAQ 100 ETF £29,682
Polar Capital Global Technology £27,803
L&G Global Technology Index £27,436
AB International Technology Portfolio £27,374
Morgan Stanley US Advantage £25,919
SSGA SPDR MSCI World Technology ETF £25,864
AXA Framlington Global Technology £25,643
FTF Martin Currie Japan Equity £25,030
GAM Star Disruptive Growth £24,888
T. Rowe Price US Large Cap Growth Equity £24,399
Baillie Gifford Global Discovery £24,368
AB American Growth Portfolio £24,047
Morgan Stanley Global Opportunity £23,835
T. Rowe Price US Blue Chip Equity £23,135
Janus Henderson Global Technology Leaders £22,951
Seilern America £22,923

Source: FE fundinfo. Total returns in sterling. Figures from 1 November 2011 to 19 October 2021. All figures are net of fees.
 

Overall, a total of 23 of the 57 sectors as defined by the Investment Association (IA) would have, on average, more than doubled the £3,600. Every single sector, from bonds and equities, to property, and even cash, increased in value.

The worst-performing sector over the past decade was Latin America, with the average fund returning just 1.1%. The two cash sectors returned 1.5% to 2.8%.

Juliet Schooling Latter, research director at FundCalibre, says: “The Junior ISA is a great savings wrapper for children and really a no-brainer when it comes to investing for their future. 

“What I can’t understand is why people are still opting to put the money into cash though. With interest rates so low for so long, this makes no sense whatsoever, especially as children have such a long investment time horizon.”

As well as the current low interest-rate backdrop another risk when it comes to cash is inflation, which slowly erodes its real value over time.

This is a problem savers and investors are having to think carefully about at the moment, given that inflation levels are expected to average 4% next year.

At interactive investor, the average Junior ISA value is £13,000. The most-held investments are Scottish Mortgage (LSE:SMT), Fundsmith Equity and Vanguard LifeStrategy 80% Equity

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

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