Faith Glasgow picks out the key investment trends from this year’s most-popular funds and investment trusts.
Despite all the upheavals of 2021, from lockdowns to fuel shortages and inflation, stock markets have kept pretty calm and carried on, an approach also adopted by interactive investor’s fund and investment trust customers.
A quick glance at the top-selling trusts and funds since the start of 2021 (to 10 December) suggests a number of established investment trends have continued through this year, including US and global strength, Baillie Gifford’s pre-eminence, the appeal of index trackers, and a preference for funds with a focus on growth stocks.
The S&P 500 index has once again led global markets, rising around 25% over 2021 (to mid-December). So it’s probably unsurprising that US and particularly broader global funds feature significantly in the top 20 lists for the year.
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In fact, that’s something of an understatement as far as the open-ended funds list is concerned. Of the 20 bestsellers, two have a US focus and another 12 are global funds. Only six invest elsewhere (and three of those are UK funds).
The investment trust line-up is more diverse, with one US trust and six global ones. The balance is made up of a mix of focuses, including technology, Asia-Pacific and cautious multi-asset, but none have more than two or three representatives.
Top 20 most-popular funds in 2021
Top 20 most-popular funds from 1 January 2021 to 10 December 2021. Source: interactive investor.
Another year of dominance for Baillie Gifford
When it comes to manager dominance, Baillie Gifford’s star continues to burn brightly, reflecting strong performances but also perhaps the manager’s powerful long-term investment ethos.
There are seven funds from the firm in the funds list, and Baillie Gifford also oversees four investment trusts, including Scottish Mortgage (LSE:SMT), Edinburgh Worldwide (LSE:EWI) and Monks (LSE:MNKS) as well as Baillie Gifford US Growth (LSE:USA).
Otherwise, discounting Vanguard (about whom more in a second), only Marlborough in the funds line-up, BlackRock and JPMorgan in the trusts list, and Fundsmith with a foot in each camp, are represented more than once.
Passive proving popular
Another powerful trend among open-ended fund investors is towards passive investments, which clearly retain their appeal for investors sceptical about the ability of most active managers to add value over the long term after costs.
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Seven of the 20 bestseller slots go to index trackers, but Vanguard’s offerings dominate, occupying six of them. Interestingly, the top three are from the US index tracking giant’s LifeStrategy bond/equity mixed-asset range.
They may be bought as cheap core holdings to which more adventurous focused active funds can be tacked on, or as ‘one-stop shops’ for starting or disengaged investors. The 60% and 80% versions form part of interactive investor’s Quick-start Funds, which are aimed at beginner investors.
Growth funds in high demand
Another interesting observation is the prevalence of growth-focused funds and the lack of those with a value bias.
A year ago, value stocks were on something of a roll as the first Covid vaccines were distributed and investors looked ahead to economic recovery. But taking a year-long perspective, there is little indication of a significant switch in allegiance among fund and trust investors.
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That’s borne out by the dominance of growth investor Baillie Gifford, the cluster of UK growth investments at the bottom of the funds list and the presence of a handful of technology funds and trusts.
Again, the style bias is somewhat less clear-cut among trusts than funds, but that’s mainly because the list contains more multi-asset and multi-style offerings. Examples include Alliance Trust (LSE:ATST), F&C (LSE:FCIT), Capital Gearing (LSE:CGT), RIT Capital Partners (LSE:RCP) and Personal Assets (LSE:PNL).
Top 20 most-popular investment trusts in 2021
Top 20 most-popular investment trusts from 1 January 2021 to 10 December 2021. Source: interactive investor.
Lack of appetite for UK funds and trusts
There are also a couple of arguably more surprising biases in evidence from the tables.
UK funds remain relatively out of favour with investors, despite the market’s continuing cheapness, with just three open-ended choices and a couple of closed-ended ones making the top 20 line-ups.
Interestingly, three of the five are small companies funds; and only one, City of London trust, is income-focused, despite the historic importance of the UK for dividend-seekers.
Sustainability lacking most-popular fund and trust lists
Perhaps more surprisingly, given the stellar trajectory of the green agenda this year and expectations that investors’ priorities too were evolving, there is little evidence of a strong shift towards environmental or sustainably focused funds.
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On the closed-ended list, Greencoat UK Wind at number 20 is the only trust with an overt environmental theme, while among the open-ended bestsellers, Baillie Gifford Positive Change stands out as investors’ sustainable choice.
However, it’s worth noting that other managers including Baillie Gifford, Smithson and Alliance Trust have been proactive in incorporating ESG considerations as an integral part of their investment process.
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.
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