Passive strategies and blue chips dominated purchases during last month’s crash. We list them here.
Customers of interactive investor, the UK’s second-largest direct to consumer investment platform, flocked to passive solutions amid coronavirus-linked market volatility, with tracker funds and funds using passive strategies accounting for 8 of the top 10 spots on the bestsellers list.
When it came to investment trusts, the well-known generalists dominated.
As for direct equities, the top ten was focussed on stocks which traditionally lean towards being higher dividend yielders – an insurance that has started to evaporate in recent days as many companies have chosen to defer or cancel dividends, either for financial prudence or because of regulatory pressure.
While the most-bought funds list still contains firm favourites Fundsmith Equity and Vanguard LifeStrategy 80% Equity in the top two spots respectively, the four new entries in the top 10 line-up on from February’s instalment are all funds tracking a UK index.
Entering the list in sixth place is Vanguard FTSE UK. All Share Index, with HSBC FTSE 100 Index in eighth ahead of Fidelity Index UK in ninth position, and Vanguard FTSE 100 Index makes the cut in tenth place.
In keeping with the passive theme, funds by US leviathan Vanguard once again dominate the most-purchased list, scooping six of the top 10 spots. Vanguard LifeStrategy 100% Equity climbs three places to third in the list and the Vanguard US Equity Index has risen two places to fifth.
Meanwhile, the Vanguard LifeStrategy 60% Equity – the only faller in the table - slips one place to the fourth spot.
Lindsell Train Global Equity, the second actively managed proposition on the list after Fundsmith Equity, ranks in seventh position.
When it comes to investment trusts, there are three new entries to the top 10 list of bestsellers. The highest ranking among them is Finsbury Growth & Income (LSE:FGT) in fourth place, with Merchants Trust (LSE:MRCH) and F&C Investment Trust (LSE:FCIT) taking eighth and ninth spots respectively.
Scottish Mortgage (LSE:SMT) remains rooted at the top of the table – boasting a record as the most purchased investment trust on the interactive investor platform month in, month out since February 2014, except once. City of London (LSE:CTY) remains in second place.
Among the fallers are Allianz Technology Trust (LSE:ATT) which fell from third to tenth position. Both Smithson (LSE:SSON) and Polar Capital Technology (LSE:PCT) slip one place to fifth and seventh positions respectively.
On direct equities, Richard Hunter, Head of Markets, interactive investor says: “The market meltdown which began on Monday 9th March has, for the most part, persisted since.
“Some of our investors will have taken the difficult decision to ride out the storm, whereas for others the fact that the FTSE 100 now stands down 27% in the year to date has provided an unusual buying opportunity. Among the top ten, for example, in the year to date Lloyds Banking Group (LSE:LLOY) shares are down 54%, BP (LSE:BP.) 24%, International Consolidated Airlines Group (LSE:IAG) 67% and GlaxoSmithKline (LSE:GSK) 17%.
“In addition to these lower price levels, the top ten is also a representation of stocks which traditionally lean towards being higher dividend yielders.
“In more recent days, however, this insurance has evaporated as many companies have chosen to defer or cancel dividends, either for financial prudence or because of regulatory pressure.
“Three banks make the top ten (Lloyds Banking, Barclays and the Royal Bank of Scotland), none of which will be paying dividends in the immediate future. For others, the situation remains unclear. At the current time, GlaxoSmithKline is set to maintain its dividend, there is a possibility that Aviva (LSE:AV.) and Legal & General (LSE:LGEN) may do the same (although regulatory pressure could yet come to bear) and the oil majors in the form of BP and Royal Dutch Shell (LSE:RDSB) have announced stringent cost reduction measures without specifically referring to the dividend.
“The blue chips, which comprise 90% of this list, are nonetheless usual core portfolio holdings and the fact that investors are buying in reflects the historic benefits of taking a longer-term view.”
On funds, Teodor Dilov, Fund Analyst, interactive investor, says: “Recent events have put the active versus passive debate back into the spotlight. Against an uncertain backdrop for global markets as the world attempts to gauge the scale, parameters and full economic impact of the Covid-19 pandemic, investors increasingly favour passives – particularly those tracking a UK index.
“The UK market has gone through an extraordinary level of uncertainty in recent history amid the Brexit saga. Just when the UK market appeared to be coming out of the woods, the advent of the coronavirus outbreak pulverised investors’ sentiment to the region and global markets more broadly.
“The sharp downturns in markets over the past couple of months have presented opportunities for brave investors to buy on the dip, but markets could fall further still before it recovers.
“This isn’t to say that there is no value in active solutions. The ability for an active manager to cherry-pick investments rather than blindly follow an index is exactly what many investors want in uncertain times. It undoubtedly increases the risks, but the reward could be worth paying extra fees for – and often they are. Active managers can really prove their salt in these trying times.
“Whichever investment strategy an investor favours, they should strap in for a bumpy ride as market volatility shows no signs of abating.”
Most bought funds and investment trusts on interactive investor in March 2020 (in rank order)
|1||Fundsmith Equity||Scottish Mortgage|
|2||Vanguard LifeStrategy 80% Equity||City of London|
|3||Vanguard LifeStrategy 100% Equity||Alliance Trust|
|4||Vanguard LifeStrategy 60% Equity||Finsbury Growth & Income|
|5||Vanguard US Equity Index||Smithson|
|6||Vanguard FTSE UK All Share Index||Monks|
|7||Lindsell Train Global Equity||Polar Capital Technology Trust|
|8||HSBC FTSE 100 index C Acc||Merchants|
|9||Fidelity Index UK Fund P Acc||F&C Investment Trust|
|10||Vanguard FTSE 100 Index Unit Trust A||Allianz Technology|
Most bought direct equities on interactive investor platform in March 2020 (in rank order)
|1||Lloyds Banking Group|
|3||Royal Dutch Shell|
|6||Legal & General|
|7||International Airlines Group|
|9||Royal Bank of Scotland|
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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.