UK equity income funds are most researched, but US options are becoming more popular, writes Holly Black.
Investors considering where to put their money continue to concentrate their research efforts on UK funds, despite uncertainty around Brexit. The UK equity income fund sector has consistently been the most researched for three years, along with the UK all companies sector, according to the latest FE list of most researched funds.
But just because investors are looking at their UK fund options doesn't mean they are backing them. The UK stockmarket has been firmly out of favour with investors in recent months. Figures from trade body the Investment Association show that investors have been pulling millions out of these funds as they continue to worry about the effect of a 'no-deal' Brexit.
Indeed, the UK all companies fund sector suffered outflows of £355 million in June alone. Charles Younes, research manager at FE, says:
"Investors often feel more comfortable investing in their home market because it is more familiar than others. However, Brexit-induced volatility will have been a big factor recently, as investors mull over their asset allocations.’"
The £16.7 billion Fundsmith Equity fund has held a place in the top five most-researched funds since July 2015. Terry Smith's flagship fund has continued to attract inflows amid continued strong performance. It has returned 89.3 % over the past three years. The fund has been the most-bought by interactive investor users for several months.
Investors have also been keeping their eyes on Woodford Equity Income, though for a different reason. The fund has seen its assets under management fall to £6 billion over recent months, as performance has dragged after some stock-specific issues within the fund. It is down 0.5% over three years.
While Standard Life Global Absolute Return had held a place in the top five most-researched funds since its launch in 2008, poor performance has seen investors turn their attention elsewhere. This year the fund has dropped to ninth place. The fund, which aims to deliver an annual return of cash plus 5% over a rolling three-year period, is down 4.8% over three years.
Instead, investors have been looking at funds focused on the US, where economic growth and the strong performance of the so-called FAANG stocks (Facebook Inc A, Apple Inc, Amazon.com Inc, Netflix Inc and Alphabet Inc A ) have driven performance. Three years ago just one North America fund made it into the list of top 50 most-researched funds; this year there are four. Among them are Artemis US Select, which is up 78.5% over three years, and Old Mutual North American Equity, which has returned 79.6% over that period. The funds were 16th and 28th in the most-researched table, according to FE.
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