There was very little change to the most-bought fund list in August, as investors continued to back Terry Smith’s Fundsmith Equity fund and track markets with low-cost passive funds.
Despite the continued backing by interactive investor customers, Smith’s flagship strategy is trailing its benchmark, the MSCI World index, this year. Fundmsmith Equity is up 8.8% compared with 9.9% for its benchmark in 2023. However, it is still ahead of the 6.7% return for the typical global equities stock picker.
One of only two active funds on the list, Smith buys companies that have strong moats around their businesses and are still growing steadily. His tops stocks include tech firms Microsoft and Meta (formerly called Facebook), as well as healthcare groups like Novo Nordisk, alongside consumer companies such as LVMH and L'Oreal.
The second most-popular fund is also actively managed: Royal London Short Term Money Market. This fund owns low-risk bonds set to mature soon in order to collect a safe income for investors. It currently yields around 5%.
This strategy has seen its popularity soar this year as interest rates have risen, which has pushed up the yields on bonds.
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Unchanged in third and fourth place were Vanguard LifeStrategy 80% Equity and L&G Global Technology Index. The artificial intelligence boom is boosting performance for the latter passive fund, which has returned 37% this year. Investors should note that it has become extremely concentrated in just a handful of shares: Apple makes up nearly 20% of the portfolio and Microsoft is 16.5%.
Both tracker funds capture the returns of global shares, with Vanguard’s Global All Cap fund owning shares on a market cap-weighted basis, meaning it owns more than 7,000 funds ranked by their market cap, and LifeStrategy 100% owning a basket of Vanguard index funds. Vanguard’s LifeStrategy approach takes measures to avoid overconcentration in US shares and has more invested in the UK.
Up one to eighth place was the Vanguard FTSE Developed World Ex UK Index, while L&G Global 100 Index held onto tenth place. Both are global funds, with the nuances that Vanguard’s strategy strips out UK shares, and L&G’s fund owns just 100 of the largest and most global shares in the world. Both have been top performers due to their high concentration in US shares.
HSBC FTSE All World Index was a new entry in ninth. For a yearly fee of just 0.13%, it tracks around 3,500 global shares, excluding emerging markets. The Vanguard global tracker fund mentioned above includes emerging markets and costs 0.14% in fees. Meanwhile, L&G Global 100 Index also costs 0.14%.
Dropping off the list this month was Fidelity Index World, another global tracker fund.
|Fund||IA Sector||Ranking change from previous month||1-year return to 1 September (%)||3-year return to 1 September (%)|
|Fundsmith Equity||Global||No change||6.9||19.8|
|Royal London Short Term Money Market||Short Term Money Market||No change||3.9||4.3|
|Vanguard LifeStrategy 80% Equity||Mixed investment 40%-85% shares||No change||2.5||19.2|
|L&G Global Technology Index||Technology and Technology Innovations||No change||18.9||42.2|
|Vanguard LifeStrategy 100% Equity||Global||Up one||4.5||31|
|Vanguard FTSE Global All Cap Index||Global||Up one||3.9||29.5|
|Vanguard US Equity Index||North America||Down two||4.6||37.8|
|Vanguard FTSE Developed World Ex UK Index||Global||Up one||4.8||33.5|
|HSBC FTSE All World Index||Global||New entry||3.3||29.4|
|L&G Global 100 Index Trust||Global||No change||7.3||42.3|
Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of August.
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