Interactive Investor

Top 10 most-popular investment funds: February 2022

1st March 2022 15:07

Nina Kelly from interactive investor

Baillie Gifford and Vanguard in a one-sided fight, and a new entry in our rankings.

There has been a surge in investors buying passive funds in the search for some stability amid the geopolitical turbulence triggered by Russia’s invasion of Ukraine. Fund leviathan Vanguard dominates this month’s rankings, with six of its passive funds in the top 10, according to data on the most-bought funds on the interactive investor platform.

In contrast, actively managed Baillie Gifford funds, which are growth-focused and suffering in the inflationary environment, have been clobbered by the market rotation to value stocks. There is now only one fund from the asset manager’s crop in our top 10: tech-heavy Baillie Gifford American (fifth place), with ethical option Baillie Gifford Positive Change exiting the top 10. Saltydog Investor, writing in late February, remarked that “the worst [performing fund so far this year, to 19 February] is Baillie Gifford American. It was the best-performing fund in 2020 when it went up by more than 100%, [but] this year it is currently down 28%.”

However, despite these short-term blips in performance, Baillie Gifford remains popular among investors, and for the second year running it was the most successful active fund manager in terms of attracting investors to its fund range, according to the Pridham Report.

Despite having its worst-ever month in January as the aforementioned market rotation played out, Fundsmith Equity investors continue to be loyal to star fund manager Terry Smith and his strategy of investing in high-quality, resilient growth companies. Yet again, Fundsmith Equity was the most-bought fund on the interactive investor platform. Smith disclosed in January that he had bought shares in Google parent Alphabet (NASDAQ:GOOG). Two more purchases are under way and details will be disclosed in due course.

In second, third and fourth place, respectively, were low-cost multi-asset funds from Vanguard’s LifeStrategy range, namely the 80% Equity , 100% Equity  and 60% Equity options. The 60% and 80% Equity options are both in interactive investor’s Quick-start Funds range, aimed at beginner investors.

Myron Jobson, interactive investor’s senior personal finance campaigner, recently reflected on the next steps for beginner investors on the two-year anniversary of the first Covid-linked market sell-off. Jobson says: “If you're new to investing, or simply don’t have much time on your hands, multi-asset funds are good one-stop-shop solutions.

“They split your money across a mix of different types of investments, but mainly shares and bonds. The bond exposure can take some of the sting out of stock market volatility. Having exposure to different assets can help to spread investment risk.”

Two other passive plays, Vanguard US Equity Index (ninth) and the Vanguard FTSE Global All Cap Index (seventh), were still in demand among investors, while Vanguard’s sixth fund in the table, Vanguard FTSE UK Equity Income Index, was a new entry in eighth place. The fund, which appears in interactive investor’s Super 60 list of rated investments, seeks to track the performance of the FTSE UK Equity Income Index, which consists of shares of companies listed on the London Stock Exchange’s main market that are expected to pay dividends that generally are higher than average.

Income investors have perhaps sought out this low-cost fund (ongoing charge figure of 0.14%) given the market rotation to value shares and the post-pandemic dividend recovery. Value sectors, including energy, miners and financials, make up a sizeable chuck of the FTSE 100 market cap and tend to perform better than their “growth” counterparts in an inflationary environment. In its most recent factsheet to the end of January, Vanguard FTSE UK Equity Income Index’s largest exposure is to financials (27%), followed by basic minerals (16.6%%), and its top 10 holdings include miners Glencore (LSE:GLEN)Anglo American (LSE:AAL) and Rio Tinto (LSE:RIO), and oil majors Shell (LSE:SHEL) and BP (LSE:BP.).

L&G Global Technology Index, down three places to sixth, was named among 12 funds that have proved to be the most consistent over the past three years by Saltydog Investor.

Finally, growth-focused Rathbone Global Opportunities retained 10th place from the previous month. In February, co-manager James Thomson spoke to interactive investor as  part of our Insider interview video series, explaining why he has reduced exposure to tech and why he is buying banks for the first time in five years.

Thomson said: “The one-sided dominance of tech and growth strategies is starting to fade. Growth has outperformed, almost without challenge for the past 15 years, and some parts of the market have been so starved that a period of catch-up has been likely for some time. We are really getting back to an investment world that isn’t so binary anymore and we started to see the shift last year.”

Top 10 most-popular investment funds: February 2022

Rank   Fund IA sector Ranking change since previous month 1-year return to 28 Feb (%) 3-year return to 28 Feb(%)
1 Fundsmith Equity Global No change 6 44
2 Vanguard LifeStrategy 80% Equity Mixed investment 40%-85% shares No change 7.1 30.1
3 Vanguard LifeStrategy 100% Equity Global Up one place 10 36.1
4 Vanguard LifeStrategy 60% Equity  Mixed investment 40%-85% shares Up one place 5 24.1
5 Baillie Gifford American North America Up two places -34.1 68
6 L&G Global Technology Index Technology & Telecommunications Down three places 13.1 110
7 Vanguard FTSE Global All Cap Index Global Up one place 8.1 41.1
8 Vanguard FTSE UK Equity Income Index UK Equity Income New entry 21.1 17
9 Vanguard US Equity Index North America Down three places 13 57
10 Rathbone Global Opportunities Global No change 4 53

Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of February.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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