Interactive Investor

The 20 most-popular funds and investment trusts of 2022

15th December 2022 12:08

Kyle Caldwell from interactive investor

We run through key trends that have led to plenty of changes in our top 20 most-bought funds and trusts compared with a year ago. 

Over the past year, investors have been tapping into two key trends: passive strategies and income-producing funds and investment trusts.

The first trend is reflected in changes to interactive investor’s top 20 most-bought funds and investment trusts in 2022 versus 2021.

In a separate article this week, we covered the funds and trusts that have fallen down the rankings. The explanation here is that growth mandates have become less popular. For funds and trusts that invest in growth stocks, performances have soured in response to high inflation and interest rate rises, which devalue the future earnings of such businesses.

The funds moving into the top 20

In this article, we focus on the funds and investment trusts that have become more popular this year. For funds, there are nine new entries, with seven investing passively. All the index funds invest predominately in developed markets, and many investors would view these strategies as core holdings.

Four global index funds entered the top 20 this year (in the 11 months to the end of November): Fidelity Index World, HSBC FTSE All-World Index, L&G Global 100 Index Trust, and L&G International Index Trust. These passive strategies mainly, or exclusively, invest in developed markets, with low or no exposure to emerging market economies.

The other three tracker funds that entered the top 20 are Vanguard FTSE UK Equity Income, Fidelity Index UK, and HSBC American Index.

The increased demand for passive strategies reflects scepticism over the ability of fund managers to add value when stock markets are volatile. Usually, one would expect choppy markets to play into the hands of active funds, due to the ability of managers to make changes to portfolios. However, in 2022 most active funds underperformed passive funds.

In the Investment Association’s (IA) global fund sector, for example, the best-performing passive fund over the past year (to 9 December), with a return of 3.6%, is UBS FTSE RAFI Developed 1000 Index. Only around 5% of active funds have produced higher returns, mainly those that have been big backers of energy stocks, which benefited from rising oil prices.

For funds in the UK All Companies sector, the best-performing passive sits in second place over one year. The Invesco FTSE RAFI UK 100 ETF has returned 9.7% and the only active fund that’s beaten it is Invesco UK Opportunities, with a gain of 10.1%.

Overall, 14 of the 20 most-bought funds invest passively. In second, third and fourth place are three of Vanguard’s LifeStrategy funds. These multi-asset funds give investors low-cost exposure to shares and bonds and the yearly charge per fund is 0.22%.

The two active funds entering the rankings, in 19th and 20th place respectively, are TB Guinness Global Energy and FTF ClearBridge Global Infrastructure Income. TB Guinness Global Energy’s increased popularity came as its investment approach enjoyed a purple patch of form, while FTF Clearbridge Global Infrastructure Income’s inclusion is part of a wider trend of greater investor appetite for income. The fund, part of interactive investor’s Super 60 investment ideas, has a yield of 5%.

Three of the four other active funds, Baillie Gifford American, Baillie Gifford Positive Change and Rathbone Global Opportunities, have fallen down the rankings over the past year. The outlier is Fundsmith Equity, which has kept its place as the most-popular fund among interactive investor customers.   

Top 20 most-popular investment funds in 2022 

Source: interactive investor. 2022 data is to the end of November. 

Hunt for income boosts demand for high-yielding trusts

Greater demand for income is more prevalent among investment trusts. Most of the new entries in the top 20 most-bought trusts this year – seven of the nine – have an income focus and a high dividend yield to boot.

Given how volatile markets have been this year, combined with a backdrop of inflation at its highest level in decades, the increased appeal of income-focused strategies makes sense. After all, providing income is paid, dividends give investors a tangible return.

However, remaining in the top spot is growth-focused Scottish Mortgage (LSE:SMT). This global trust invests in businesses aiming to deliver high growth in the years to come. Its heavy share price fall in 2022 – down around 40% – has not dented its popularity and it has consistently occupied the top spot each month since June 2019.

The highest ranked of the new income entrants is Greencoat UK Wind (LSE:UKW), which as the name suggests invests in UK winds farms. It was the fifth most-bought investment trust in the first 11 months of this year, while in 2021, it was below the top 20.  

The trust aims to increase its dividends in line with retail price index (RPI) inflation, which has become a greater attraction given that inflation is at its highest level in decades. Greencoat UK Wind’s yield of 5.1% will be a key attraction for investors.

Lower down the list, the 13th and 14th most-popular trusts of 2022 so far are Renewables Infrastructure Group (LSE:TRIG) and Gore Street Energy Storage Fund (LSE:GSF), which have yields of 5.3% and 6.4%.

With renewable energy trusts, it is important that investors look under the bonnet and understand how each trust invests. Some of these specialists invest in a niche area, either solar, wind, hydrogen, energy efficiency or energy storage. Others have a mix of renewable exposure, with some aiming to benefit both from when the wind blows and when the sun shines.  

Renewables Infrastructure invests in wind, battery storage and solar, whereas Gore Street Energy Storage’s investment specialism is clear from its name.

The other four income strategies that are new entrants in the top 20 have higher yields than their peers. The two highest, at 9.7% and 8.9% respectively, are European Assets (LSE:EAT) and Henderson Far East Income (LSE:HFEL).

High yields offer investors the prospect of higher income today, but there are no guarantees that this will result in market-beating returns from a total return perspective – when both capital and income are combined. In the case of both European Assets and Henderson Far East Income, their three, five and 10-year returns have notably underperformed their respective sector averages.

Merchants Trust (LSE:MRCH), with a dividend yield of 4.9%, has achieved strong overall returns and is offering a high income today. It has outperformed the average UK equity income investment over both short and long-term time periods, and was the 15th most-bought trust in 2022. 

Murray International (LSE:MYI), yielding 4.2%, has slightly underperformed the average global equity income investment trust over three and five years. Over 10 years, it has fallen short of the sector average, returning 97.5% versus 134.7%.

Yet over the past year it has notably outperformed, up 19.3% against 5.8% for the sector average. Murray International, managed by Bruce Stout, has a bias towards Asia and the emerging markets. This, along with having a higher dividend yield compared with most rivals, sets it apart from other offerings. The trust, which has raised its dividend for the past 17 years, is part of interactive investor’s Super 60 investments . It was the 18th most-bought trust in 2022. 

Other dividend-paying trusts proving popular among investors in 2022 include City of London (LSE:CTY), Alliance Trust (LSE:ATST) and F&C Investment Trust (LSE:FCIT), which all moved up the rankings. Alliance Trust and F&C have lower yields and more of a growth focus. All three are dividend heroes, having raised payouts ever year for more than five decades. 

The other two new entries in the top 20 are Ruffer Investment Company (LSE:RICA) and HarbourVest Global Private Equity (LSE:HVPE).

Ruffer Investment Company’s growing year-on-year popularity reflects greater caution among investors. It is one of a handful of “wealth preservation trusts, which seek to protect capital at times of stock market turbulence by having a diversified portfolio of assets extending beyond just shares and bonds. It also aims to give investors a positive return in a variety of market conditions, which it has certainly achieved  against the past year’s stormy backdrop. Ruffer has returned 5.5% over the past year versus an average loss of 9.1% for the Flexible Investment sector.

Two other wealth preservation strategies have improved their place in the rankings over the past year. Capital Gearing (LSE:CGT) has climbed the table from 13th to 5th, while RIT Capital Partners (LSE:RCP) advanced from 17th to 12th.

The final new entry, in 20th place, is Harbourvest Global Private Equity. Private equity trusts invest in growth companies, which are no longer flavour of the month given the tightening in monetary policy. High inflation and interest rate rises devalue the future earnings of growth companies. Such companies have seen their share prices fall heavily in 2022. As a result, some investors are fearful that private companies have also seen big markdowns in their value.

Over the past year, Harbourvest Global Private Equity has lost 21.4%, more than the 7.2% average loss for the Private Equity sector. However, its strong long-term track record and sky-high discount, currently 47.7%, is being seen by some investors as a value opportunity.

Top 20 most-popular investment trusts in 2022 

Investment TrustRanking in 2022Ranking in 2021
Scottish Mortgage (LSE:SMT)11
City of London (LSE:CTY)23
BlackRock World Mining Trust (LSE:BRWM)34
Greencoat UK Wind (LSE:UKW)4New entry
Capital Gearing (LSE:CGT)513
Smithson Investment Trust (LSE:SSON)66
Ruffer Investment Company (LSE:RICA)7New entry
Polar Capital Technology (LSE:PCT)810
F&C Investment Trust (LSE:FCIT)919
Alliance Trust (LSE:ATST)1015
Allianz Technology Trust (LSE:ATT)1120
RIT Capital Partners (LSE:RCP)1217
Renewables Infrastructure Group (LSE:TRIG)13New entry
Gore Street Energy Storage Fund (LSE:GSF)14New entry
Merchants Trust (LSE:MRCH)15New entry
Henderson Far East Income (LSE:HFEL)16New entry
Edinburgh Worldwide (LSE:EWI)172
Murray International (LSE:MYI)18New entry
European Assets (LSE:EAT)19New entry
HarbourVest Global Private Equity (LSE:HVPE)20New entry

Source: interactive investor. 2022 data is to the end of November. 

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.