Fundsmith Equity and key trends among most-popular funds

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The latest episode of On The Money covers key trends in the latest edition of the ii Top 50 Fund Index (Q3 2025), which ranks the most-bought funds, investment trusts and exchange-traded funds (ETFs) among ii customers.

Kyle and senior fund content specialist Dave Baxter discuss Fundsmith Equity I Acc’s exit from the index, why some investors prefer China over India, how to reduce US concentration risk, and the rise of value-focused funds. Other topics include Smithson Investment Trust Ord (LSE:SSON)’s proposal to become an open-ended fund, and whether it’s too late to join the commodities party.

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Timestamps

01:19: Introduction to the ii Top 50 Fund Index, a quarterly report (latest edition Q3 2025) ranking the most-bought funds, investment trusts and ETFs among ii customers

02:02: Why Fundsmith Equity has fallen out of the ii Top 50 Fund Index and underperformance over the past five years

04:26: Terry Smith’s half-yearly letter to investors citing Novo Nordisk as one reason for the fund’s underperformance in the first six months of 2025

06:22: Fundsmith Equity’s outperformed since launch in 2010, but the performance gap versus the MSCI World Index is narrowing

08:07: The size of Fundsmith Equity

09:55: How some ii customers have responded to Fundsmith Equity’s recent underperformance

12:24: How to mix and match index funds/ETFs and active funds

14:33: Smithson Investment Trust’s proposal to restructure into an open-ended fund

19:28: Why Jupiter India exited the ii Top 50 Fund Index in Q3, and newcomer Fidelity China Special Situations

24:00: Waning popularity of US-focused funds and how to reduce US concentration risk

27:04: Value funds in demand

29:23: Investors buy commodity funds, including exposure to gold and silver

32:32: Why Royal London Short Term Money Market is the most-popular fund in the ii Top 50 Fund Index Q3.

Kyle Caldwell, funds and investment education editor at interactive investor: Hello, and welcome to the latest episode of On the Money, a weekly look at how to make the most out of your savings and investments.

Before we go any further, I just wanted to flag that next week’s podcast episode will be a day later than usual. The episode is going analyse the personal finance measures announced in the Budget.

To be totally honest, I feel the episode will benefit from not being rushed out, with us having a bit more time to analyse the contents of the famous red briefcase.

So, that episode will be published on Friday 28 November, and I’ll be joined by ii’s personal finance editor, Craig Rickman, who will provide his expert analysis.

Today, we’re going to be looking at how investors favourite funds have changed in 2025, and I’m delighted to be joined by ii’s newest recruit, Dave Baxter. You may be familiar with Dave, particularly if you are a subscriber to Investors’ Chronicle, as Dave was funds editor of the Chronicle for many years until he recently joined ii. Dave, thanks for coming on the podcast.

Dave Baxter, senior fund content specialist: Thank you very much for having me.

Kyle Caldwell: So, Dave, we’re going to be covering the ii Top 50 Fund Index. This is a quarterly report in which we rank the most-bought funds, investment trusts, and ETFs.

Essentially, it’s a big league table that indicates what’s popular with retail investors at the moment. I’m going to be talking about some of the key trends within that index.

The first thing we’re going to cover, which stands out, is that Fundsmith Equity is no longer in the ii Top 50 Fund Index.

So, it was in the index since we started it in the summer of last year. However, it’s no longer in the index. Why do you think, Dave, that Fundsmith Equity has become less popular with retail investors?

Dave Baxter: So, the main guess would be one word, performance. Perhaps we should caveat as we’ll get into it, long-term performance has been good, and you’ve still made gains from holding Fundsmith Equity. But if you look at recent years, since 2021, it’s basically underperformed the MSCI World Index for every single calendar year.

It looks like unless things change dramatically in the next few weeks, we’ll see that again in 2025. So, my assumption would be that people have simply been looking elsewhere, either thinking they’ll just buy a global tracker, or even going for some different active funds.

It is worth noting, obviously, it’s been difficult for an active fund in recent years to even keep pace with the MSCI index for reasons that we’ll discuss. But if you now look on a five-year stretch, it sits in the fourth quartile of the Investment Association’s (IA) Global fund sector.

Just to touch on the reasons behind that underperformance, Terry Smith has been very open about this in recent years, the obvious one is the classic lament of the active manager. The MSCI World index is chockablock with those so-called Mag Seven stocks, the big tech names.

And, for diversification purposes and just out of preference, Terry hasn’t had as much in them. He hasn’t held NVIDIA Corp (NASDAQ:NVDA). He does have a big Microsoft Corp (NASDAQ:MSFT) position. He has made a lot of money off Meta Platforms Inc Class A (NASDAQ:META), but he’s not as heavily in there as a tracker fund will be.

A couple of other points just worth briefly mentioning. One is that there have been points in the last five years or so when so-called value stocks have done well, and Fundsmith hasn’t held those. So, in 2021, you had a bit of a comeback, and they weren’t able to capture that upswing.

Finally, there’s a bit of stock-specific trouble in the form of Novo Nordisk AS ADR (NYSE:NVO). It was a very popular stock, a real market darling, and Fundsmith did have a lot of exposure there. But I was looking just before we started recording, and over 12 months, it’s down something like 60% because it’s had various missteps.

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Kyle Caldwell: You just mentioned Novo Nordisk. Terry Smith, in his half-yearly letter to investors - he writes two letters a year, which the vast majority of managers don’t do. I think it’s refreshing that he writes these letters and he’s pretty transparent in terms of giving investment commentary and explaining why the fund has underperformed, if it has underperformed.

So, for the first half of this year, he mentioned that Novo Nordisk was one of the main reasons why the fund underperformed versus the MSCI World Index. My understanding is that, as you mentioned, Dave, from its peak, which was around last summer, the share price fell about 60%.

My understanding is that that’s because it lost some ground to its main competitor, Eli Lilly and Co (NYSE:LLY). The fact is that it was first to market with one of its weight-loss drugs that excited investors. It caused the share price to go up a lot. The valuation went up a lot, and there’s been sort of a natural correction due to the fact that the share price had that strong run and the valuation became pretty expensive.

You also touched on the Magnificent Seven. On a five-year view, that has been a big headwind for Fundsmith Equity. It’s also been a big headwind for a lot of actively managed global funds.

The MSCI World Index has been a very hard index to beat over the past five years due to how concentrated returns have been in a handful of the biggest technology stocks, which are listed on the US stock market.

In terms of performance, you mentioned that the fund has fallen into the fourth quartile of its sector, which is the Investment Association Global sector.

Just to put some figures on that, Fundsmith Equity over five years returned 33.8% vs 54.9% for the average global fund. For that sector, there’s a couple of hundred funds. Most are actively managed funds, but there are some index funds in that sector as well. But as you say, Dave, if you bought the fund at launch and you’ve held on throughout, you’ve done very well. It’s outperformed since launch.

So, since 2010, the fund’s up 14% on an annualised basis, and that compares to 12.4% on an annualised basis for the MSCI World index. But over the past couple of years, that gap has certainly narrowed due to its performance lagging over shorter-term time periods.

When I say shorter-term periods, I do think five years is a period that may be concerning for investors. That’s not necessarily a short amount of time. Five years is seen as a very good measure to analyse fund performance due to the fact that in that time period, you’re going to get both rising and falling markets.

Dave Baxter: Difficult, isn’t it? Because, particularly with active funds, these things can be a bit cyclical, you can go in and out of favour. And sometimes you do need to just exercise that patience and think, ‘I believe in the process. They’re still being consistent with how they operate’, but it’s very psychologically understandable if you’re now heading to the point where you’re thinking, OK, it’s been five years, and, as you say, that gap is getting bigger and bigger.

Kyle Caldwell: In terms of the fund’s size, there’s been lots of articles written over the years about how big the fund is and whether this means that the fund manager, Terry Smith, is constrained by that size. What are your thoughts, Dave?

I assume if you’re still holding the fund and you’re hoping for a recovery to play out, due to its sheer size, it’s not going to go down the market cap spectrum and have lots of mid-caps and small caps. It simply cannot do that.

But then again, on the other hand, you wouldn’t expect the fund to do that. It does invest in really big companies. It’s going to stick to its knitting, and its investment process is going to stay the same anyway.

Dave Baxter: Yeah. It’s interesting because it shouldn’t really struggle with liquidity because, as you said, it invests in these behemoth companies. I was looking at the end of October, and its median market cap of a holding is nearly £104 billion, I believe. So, you’re not going to have huge trouble buying and selling. However, as you mentioned, you can’t necessarily buy some companies that will drive some growth.

And if you look back to his earlier years, or the fund’s earlier years, there were holdings like Domino's Pizza Group (LSE:DOM). I think you’ve mentioned before that they did hold that at some point, and it generated some quite nice returns. But now owing to the sheer size of the fund, they just wouldn’t be able to hold that.

So, you are potentially having to go for companies that have less in the way of exciting and rapid growth, which could have an impact. Although I suppose one strange silver lining of the outflows is that the fund is huge, but it’s not as huge as it was. It’s around £17 billion in size now and at its peak, it was at least over £25 billion. So, bizarrely, maybe one of those problems is slightly less of a problem than it was before.

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Kyle Caldwell: We asked some of our customers for their views on Fundsmith Equity, and we did this on our ii Community app.

For those who are not familiar, ii Community is a social trading network in which you can connect with investors, talk about your investments, and see how your portfolio compares to others. It’s free for ii customers, so do check it out and please do get involved.

So, I asked those on ii Community, of which there are now over 30,000 members, for their views on Fundsmith Equity, and whether they’ve been holding or selling, whether they’ve made any changes.

There’s lots of great interaction. There were 58 comments on the post. In the main, most people who responded said that they’d either completely sold out or they now had a small holding in Fundsmith Equity, and that’s on the back of its performance in recent years, ie, underperforming the MSCI World index.

There didn’t seem to be much optimism in terms of them expecting performance to turn around. Some of the people who commented were comparing Fundsmith’s fee with a low-cost tracker fund and saying, at the end of the day, if you’d bought an index fund or an ETF, then you’ve performed much better over that five-year period.

Dave Baxter: The fee is an interesting point, isn’t it? Because somewhere around the 1% mark, which is even a bit pricey for an active fund, and they’ve never really brought the fee down even as the fund has grown, which even when performance was really fantastic, that was a bit of a bone of contention among investors.

Kyle Caldwell: Completely agree, Dave. I do think it’s a shame that, overall, the fund industry doesn’t typically pass on economies of scale. You do see it with investment trusts. When investment trusts reach a certain size or threshold, there’s a tendency to lower the annual management fee. But I just don’t think that happens that much with open-ended funds.

I’d love to see that happen more often because, if you can pass on economies of scale, if it’s cheaper to run as you’ve got more assets, then it’d be great if you could pass that on to the underlying investments in the form of a lower fee.

Dave Baxter: Agreed. I think at the end of day, performance is still the main thing, but it’s kind of the goodwill, isn’t it? And if, like you say, it’s cheaper to run a fund, then pass it on.

Kyle Caldwell: Some of the customers who responded to the post on our ii Community app pointed out that they had replaced Terry Smith with a global index fund or a global ETF.

One thing I’d say on that is that whatever investments you have, it’s really important that you have a diversified portfolio and that every single fund you own - whether it’s an actively managed fund, or you simply own the market through an index fund or ETF - is bringing something different to the party, adding something to the portfolio, and that you’re not duplicating too much in terms of fund style and the underlying holdings as well.

I do think if you own a global index fund or a global ETF, Fundsmith Equity is very different from the wider market. If it wasn’t very different, then it wouldn’t have underperformed over this five-year period.

However, there are lots of other options as well. There’s lots of competition among active funds that can provide an alternative and complementary exposure to a global index fund or a global ETF.

Within the comments on the ii Community post, a couple of actively managed funds that were mentioned that investors said they had switched into were Ranmore Global Equity, WS Blue Whale Growth, and Scottish Mortgage Ord (LSE:SMT). I think you can certainly say with that trio, as well as Fundsmith Equity, that they all are very different from the wider global stock market.

Dave Baxter: Yeah. I’d definitely agree with that. I think something I’ve really noticed in recent years is - this is me narrowing down slightly to the investment trust space - but if you look at the global sector there, you have all these quite interesting funds. You mentioned Scottish Mortgage, a distinctive future trends.

You have AVI Global that does a slightly activisty value-focused approach and just lots of stuff that is at least different from the index. Although, like you say, that will mean underperformance when everything is just running ahead with these few stocks.

Kyle Caldwell: Before we move on from Fundsmith, I think it’d be an oversight if we didn’t mention the recent announcement from Smithson Investment Trust.

So, this is a global smaller companies/global mid-cap portfolio that was launched several years ago. At the time when it was launched, it was the largest investment trust IPO in the UK, and that remains the case today. There hasn’t been an investment trust launch that’s raised more money since then. So, Dave, could you run through the details?

I’ll kick off by saying it’s proposing to turn into an open-ended fund. If you disagree and you don’t want the fund to turn into an open-ended fund, then you can get your capital back close to net asset value (NAV).

One of the main reasons why they are proposing to move to this open-ended fund structure is because it’s traded on a wide discount for a number of years now, but also there’s an activist investor on its shareholder register called Saba Capital, which I assume have been applying some pressure in regards to that discount.

Dave Baxter: Yeah. I think this is really a Saba story. Saba has been targeting lots of investment trusts in the last 18 months, two years, but they do basically have to tell the market if they have a position that exceeds 5% of a trust or a company.

It was only a handful of weeks ago that it came out that they had quite a big position in Smithson. And when Smithson made the announcement this week, they mentioned the fact that Saba has something like 16%. Saba has previously pushed trusts such as recently Middlefield Canadian Income to move into other structures.

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What’s happening here is, as you mentioned, you have that discount, so your shares are, in theory, trading at a lower value to the underlying assets. But if you shunt it into an open-ended structure or an ETF structure, investors, including Saba, can then simply get out at NAV and make a profit at least versus that discount.

Obviously, some people don’t really agree with what Saba is doing, but it is producing some results.

Kyle Caldwell: In terms of the investment structure, I recently interviewed Simon Barnard, manager of Smithson Investment Trust. For those who would like to watch it, you can view it on interactive investor’s YouTube channel (or via the links below).

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I asked them why Smithson is in an investment trust structure. Like, what is the structure giving you over an open-ended funds? Since Smithson launched, it’s not used any gearing, and that’s one of the key tools an investment trust has.

I asked him whether the trust structure, of a fixed pool of assets, means that it’s easier for him to own smaller companies. But the answer Barnard gave was that he doesn’t feel like he’s constrained in any way and he feels like he’s getting enough liquidity.

I’m sure that that was a lot of the thinking behind moving to an open-ended fund. Can we run the strategy in the same way? Can we get the same levels of liquidity? When I say liquidity, I mean how easy it is to buy and sell smaller companies and mid-cap companies that the portfolio invests in through an open-ended format.

He said that that is the case. So, as you’ve outlined, Dave, this move that’s been proposed, it has been done in light of the activist investor, and it’s to eliminate the discount.

If it goes ahead, it’ll be really interesting to see how the fund size changes, as along with Saba, investors can take a view that if they’ve been unhappy with the performance, then they can pull their money out to close to net asset value rather than sitting on a discount of over 10% at the moment.

Dave Baxter: It’s interesting, isn’t it? Because they’re not going to miss out on some of the advantages of trusts. You mentioned gearing. They don’t have enormous position sizes based on recent disclosures, so they’re not going to have problems with some of the diversification rules on open-ended funds.

And, obviously, when we talk about small and mid-caps, if they’re global small and mid-caps, they’re still big companies. The one thing I do wonder is, obviously, if you’re a trust and you’re unpopular, you can be plagued by a discount, and that creates pressure.

But if you’re an open-ended fund and you’re unpopular, then people will just drag their money out. So, if they remain unpopular and they’re in that structure, they may have a bit of a headache with trying to create liquidity and with the fund shrinking, and we’ll see how that goes if that’s the case.

Kyle Caldwell: Let’s now move on to another fund that’s been popular with interactive investor customers for the past couple of years, but it’s become less popular this year, Jupiter India I Acc.

So, within our ii Top 50 Fund Index, a year ago, it was seventh overall. It’s now not even in the top 50. What are the main reasons for you, Dave, as to why that fund is not as popular as it once was?

Dave Baxter: I think it’s just a victim of the market it fishes in falling out of favour. A lot of this can be explained by looking at the performance figures. 

At the time of recording, that fund was sitting on, I think, a five-year return of 169%, so a big return. But if you look at a 12-month return, it’s on 4%. So, the performance has come off a bit.

Basically, I suppose with India, it was quite a market darling of emerging markets in recent years, and that was helped by China being out of favour.

But investors seem to have just kind of turned away from that market. Maybe it’s a victim of its own success because people started to get concerned about prices being too high. Even if you look now, they do look quite high. For example, I recently looked at ETFs operating in Asia, and you can see the price/earnings ratios in those.

The one on the India ETF is something like 25.5 times at the end of October, and that’s just much higher. I think the China one, for example, is somewhere around the 16 mark. So, it’s still looking quite expensive. Maybe people are just taking a step back, taking some profits, and putting that money elsewhere.

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Kyle Caldwell: I often find with some retail investors that India and China are pitted against each other. Some investors like to have single-country exposure to those regions. As you’ve mentioned, Dave, the fact that China has been out of favour for the past five years, its valuation is cheaper than India. So, some money has rotated into China and out of India. Within our ii Top 50 Fund Index for the third quarter, we saw Fidelity China Special Situations Ord (LSE:FCSS) enter the index. It was one of 10 new entrants, and that’s part of that trend.

Let’s now move on to what’s not changed in terms of the most-popular funds among our customers. So, global strategies continue to be really popular. Within the ii Top 50 Fund Index, 17 of the 50 invest globally. Around two-thirds of the 17 are index funds or ETFs.

Many investors are deciding that they just want to simply own the market through an index fund or an ETF rather than trying to beat it through a professional stock picker who, of course, may outperform, but may also underperform, and heavily underperform.

For me, that’s one of the key attractions with an index fund or an ETF, as well as knowing what you’re going to get on the tin, you also know that you’re not going to drastically underperform. It takes away that risk.

What are your thoughts, Dave, on investors continuing to seek global exposure? It has, of course, been a strong period for the global stock market whatever time frame you look at, five, 10, 15 years.

Dave Baxter: Yeah. I think it’s really interesting and you summed it up well. Seemingly, it does what it says on the tin. It’s a simple thing. You’re maybe getting a very broad take on markets.

But I do wonder whether people have realised that - and this is a widely discussed thing - global funds are often less global than you think given, say, that the MSCI World is something like, 72% in US shares.

So, there might be a risk now that some investors are getting too exposed to one theme, to one handful of stocks, and one market. Obviously, in the index, there are some more nuanced funds and maybe less US-heavy takes on global markets.

But, yeah, some investors might still be betting too big on a few things.

Kyle Caldwell: An interesting trend we have seen is US-focused funds become less popular. So, in the fourth quarter of last year, there were 10 US funds in our ii Top 50 Fund Index. There are now only four.

All of them that are no longer in the index were tracker funds, either index funds or ETFs, that were tracking the up and down fortunes of part of the US stock market. Investors were getting exposure to the S&P 500, but there was also demand for the technology Nasdaq index.

I think that some investors have become more conscious of US valuations, potentially the risk of a Donald Trump presidency, but also the fact that, as you’ve just mentioned, Dave, if you already have global exposure, particularly if you’re already investing in global index funds or global ETFs, you’ve already got a very large portion of your money in the US stock market anyway. So, there’s a danger that you might duplicate.

Dave Baxter: Yeah. I think that’s becoming an even bigger problem, actually. I believe in the last year, we reached a peak in terms of the, I suppose, weighting the US has in the MSCI World Index, so that risk is even greater than it was just a few years ago.

Kyle Caldwell:For investors who are concerned about the concentration risk within the US stock market, there are various ways to lower that risk. You wrote a recent article, Dave, in which you outlined some of the options. Could you summarise those?

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Dave Baxter: Yeah. There are some really interesting, weird, and wonderful options out there. So, you’ve got, for example, equal weight funds. So, you can take an index like the MSCI World, also the S&P 500, and rather than doing market cap weighting, so, you know, having Nvidia on a big weight, you would simply give roughly the same amount to every single stock.

So, you do have less riding on those big stocks, but the criticism is that you might end up suffering if the market falls anyway, and when times are good, you might miss out on those big returns.

One other option worth mentioning, I mean, there are many US options, but one global option worth mentioning that’s interesting is there’s an MSCI World Ex, or a few MSCI World Ex USA ETFs. So, they just pull the USA out of the index, and that does mean that you have some pretty chunky weightings to the other markets.

Japan is on a big weighting, for example. The UK is on a big weighting, and there’s a smattering of decent allocations to European markets. But I guess you could hold that, and then you could hold a US tracker on a smaller weighting, and just have a bit more of a nuanced approach.

Kyle Caldwell: As I mentioned earlier, I think with an actively managed fund, it’s really important to look under the bonnet, understand its strategy, and then step back and think, how is this different from the index, and is it sufficiently different from the index? Will it potentially give me outperformance over time?

This year, we’ve seen increased demand for value-focused funds, which are, in most cases, very different from the wider market. So, in terms of global value funds that we’ve seen increased demand for, they include Ranmore Global Equity and Artemis Global Income I Acc.

Within the UK, we’ve seen UK value funds such as Temple Bar Ord (LSE:TMPL) and Fidelity Special Values Ord (LSE:FSV), which are both investment trusts, become more popular with our customers this year.

What are your thoughts on this trend, Dave? Does this potentially speak to the fact that some investors are looking to diversify their exposure a bit more, especially given how strong global stock markets have been in recent years?

Dave Baxter: Yeah. I think it’s a couple of things. One factor might be investor awareness. As you mentioned, classic growth stocks have run really hard. There are concerns about valuations.

At points, we’ve briefly seen what can happen when those stocks sell off. It can be quite painful. I suppose on the other hand, it’s simply also that those funds have done really well in terms of performance, the value funds. I believe Temple Bar this year is very comfortably ahead of the competition in the UK, and the UK market is generally doing very well.

Ranmore is very interesting. It’s performed very well. Artemis Global Income as well. So, that might be down to things like, you know, classic value sectors like financials having a really good recovery in recent times. So, maybe people are just noticing that there are other ways to make strong returns rather than simply buying your global tracker or going for these big growthy funds.

Kyle Caldwell: With value funds, they are, of course, hunting for potentially mispriced opportunities, and they’re hoping that, over time, those low share prices will recover. But, again, it’s important to look under the bonnet and understand how the value fund manager’s investing and what key qualities and attributes they’re looking for in a company.

They’re typically looking for some sort of positive change, like new management, for example, or the business pivoting into a different area, such as a different type of product or service.

Again, it’s important to do your own research, look under the bonnet, and, as ever, understand what you’re buying.

We’re going to conclude by talking about the last trend that we’ve observed, and we’ve seen this trend play out more of late, and it is the increased demand for commodity-focused funds.

In particular, we’ve been seeing stronger demands for gold exchange-traded commodities (ETCs), and also silver ETCs. What are your thoughts, Dave, on that trend?

There’s been a strong run-up in terms of the spot prices of both gold and silver this year, and also before that as well. I think gold has had a really strong run over the two years. What are your thoughts in terms of investors buying at this point?

Dave Baxter: So, you can definitely call me too cautious or too bearish or too scared, but when something runs that hard, and when you see these enormous gains and all these record highs, I do start to think, is it a bit risky to buy in?

Maybe if you can’t resist, if you have the kind of investment FOMO, or you think it’s going   to go even further, then perhaps you just need to be careful and have smaller allocations. Don’t put too much money into it. And just remember the general, not very exciting but very important, diversification principles of holding other things alongside it.

I suppose it’s also interesting that there’ll be lots of people who have been holding for this year and have made these huge gains either on the metals - or the mining shares have done incredibly well, haven’t they?

In those cases, you might want to think about taking some profits and reallocating elsewhere. That is difficult because many markets have done very well this year, so not lots of things are obviously cheap. But some of those rules of thumb might be able to give you a steadier ride over time.

Kyle Caldwell: I completely agree. Position sizing is very important. In terms of position sizing, there’s a number of wealth preservation investment trusts, the likes of Ruffer Investment Company (LSE:RICA), Personal Assets Ord (LSE:PNL), and RIT Capital Partners Ord (LSE:RCP) as well.

Over the years, I’ve seen that their exposure to gold typically fluctuates between 5% to 15% maximum. Obviously, we can’t give any financial advice or regarding how much to invest in gold, but I think it’s safe to say that very high-risk assets, which gold does fit into, it is volatile over time, then you need to position size accordingly and not hold too much of your portfolio in that one particular area.

Dave Baxter: Also, it’s just worth remembering why you’re going to hold it because, I guess, classically, people have thought it’s a safe haven. You’re going to have some gold in case markets fall over. But now, do you think people are maybe just seeing that the price is doing really strongly, so it’s a momentum play? I guess you just need to consider what role it’s going to play.

Kyle Caldwell: In terms of defenders in a portfolio, the ultimate defender is cash. We’ve seen over the past couple of years, obviously, interest rates rising from rock-bottom levels to peak at 5.25%. They’ve since been falling, but interest rates are still at a high level compared to where they have been for the last 15 years.

At the moment, you can still get around 4% on a money market fund, which at the moment that’s slightly beating inflation. So, in terms of looking for defensive areas, we’ve continued to see the Royal London Short Term Money Mkt Y Acc fund be really popular with our customers.

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It’s number one on our ii Top 50 Fund Index. I suppose going forwards, the attractions of money market funds will be dictated by how low interest rates go because the yields that money market funds offer, obviously the income, that’s not guaranteed, but it is generally in line with the base rate.

Dave Baxter: I think what fascinates me here is, do you think the allure of those cash funds is going to go away, and what will drive that? Because, yes, as and when interest rates fall further, the rate will get less attractive on that particular fund.

But are people also sticking with it because there’s so much uncertainty? Because I would partly think this year, equity markets have done such big returns that you might be slightly drawn in and away from cash, but people are still opting for that cash approach.

Kyle Caldwell: Dave, thanks for your time today.

Dave Baxter: Thank you very much.

Kyle Caldwell: That’s it for our latest episode. I hope you’ve enjoyed it. You can let us know what you think, you can comment on your preferred podcast app. And if you get a chance, please do leave us a review or a rating. Those reviews and ratings are really important to improve the visibility of the podcast and to get the podcast into more ears and grow it.

In the meantime, you can check out more information and practical pointers on the interactive investor website, which is ii.co.uk. I’ll see you next week on a different day - Friday rather than Thursday - see you then.