Top 10 funds, trusts and shares in May 2020

Our experts discuss what was whetting investor appetites last month, as passives and ‘star managers’ rub shoulders in top 10.

interactive investor, the UK’s second-largest direct-to-consumer investment platform, takes a look at May’s most-bought funds, investment trusts and direct equities.

When it comes to funds, high profile passive houses continue to hog the top 10 with the same handful of high-profile active managers. But in a nod to the ‘BuildBackBetter’ ethical movement, an ethical fund has made the cut for the first time – Baillie Gifford Positive Change.

Rebecca O’Keeffe, head of investment at interactive investor, says: “Baillie Gifford occupies three of the top ten slots, Fundsmith is still in its top slot as usual and Lindsell Train Global Equity and Polar Capital Global Technology retain their places on the most-bought list. The remaining four of the top ten most popular funds are passive options, including three Vanguard LifeStrategy funds and L&G Global Technology Index Trust. 

“In volatile markets, good active managers really earn their fees.  The dispersion of stock and sector returns is far more pronounced in manic markets, making it a great environment for active fund managers who get it right. Of course, the flip side of the coin is that there is also huge scope for active managers to get it horribly wrong too, which may explain why our investors are sticking to names that have a proven record of outperformance.”

Build Back Better

Rebecca continues: “It is encouraging to see an ethical fund finally make the top 10 list. Baillie Gifford Positive Change looks to invest at least 90% of its portfolio in companies whose products or behaviour make a positive impact on society and/or the environment. 

“The post-Covid world may look very different and investors would do well to review all their holdings to make sure that their portfolio remains fit for purpose – after the collapse in March, markets have recovered across the board, but it is far from clear whether many stocks or sectors will ever be able to resume business as normal, hence some valuations may be based more on liquidity than on any realistic prospect for future earnings.  Buoyed by its strong recent performance during a period of extreme stress, investors should also think more about the ethical universe to make sure they are not missing out.”

Investment trusts and technology

Rebecca adds: “Technology and global investing is also a common theme for our investors, who are shunning the UK and concentrating on the bigger themes of global investing (also known as US tech companies) and directly held technology funds. 

“In the investment trust space, the usual suspects all make an appearance on the most-bought list, as investors again go for tried and tested managers.  Among investment trusts, discounts have widened (in some cases sharply) for those trusts that have relied on leverage to boost yield, especially among funds targeting income-seeking investors.  As their own income has been severely challenged by the Covid crisis, so this leverage has quickly gone from creating value to destroying value.”

On direct equities, Richard Hunter, head of markets at ii, says: “Joining the ever-present blue chips on the ii most-bought leaderboard in the form of the banks (Lloyds (LSE:LLOY), Barclays (LSE:BARC)) and the oils (Shell and BP) are some stocks which have different versions of recovery potential.

“The race for a Covid-19 vaccine is well documented and stocks involved along the way have been in hot demand. The potential for both health and social recovery following a return to some kind of normality has galvanised investors of late and companies largely involved in the testing process are no exception. Stocks such as Omega Diagnostics Group (LSE:ODX) (up 380% in the year to date) and Avacta Group (LSE:AVCT) (up 830%) have been a focus of large buying interest among ii customers and both feature in the top ten for May.

“Hoping for a recovery of a different kind are the beleaguered airlines. Despite uncertainty regarding a return of regular commercial flights, hindered by quarantine restrictions, ii investors are taking a longer view. Any such returns to overseas travel may be some time in coming and this has kept a lid on share prices.

"In the year to date, British Airways owner International Consolidated Airlines Group (LSE:IAG) have lost 60% and fellow FTSE 100 constituent easyJet (LSE:EZJ) down 49%. For the latter, this is a continuation of a turbulent theme – the shares were relegated from the FTSE 100 in June 2019, promoted again in December 2019 and now look extremely likely to be on their way out of the premier index once more in the imminent reshuffle.”

May most-bought funds, investment trusts and direct equities (in rank order)