Baillie Gifford falls out of favour, three new entries, and investors hunt for alternatives.
Fund manager Baillie Gifford is no longer represented in our top 10 most-bought funds table, according to the number of ‘buys’ among interactive investor customers in June.
The Edinburgh-based asset manager, whose active funds are growth-focused, is having a torrid time as the market rotation to value investing, coupled with high inflation and rising interest rates in the UK and US, piles pressure on tech stocks, whose valuations are based on expected future earnings.
The current lack of appetite for Baillie Gifford investment funds contrasts with laurels the asset manager won earlier this year. In February, the fund house was named the most successful active fund manager in attracting investors to its fund range in the Pridham report.
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Meanwhile, passive funds with their low costs, diversified strategies and, often, global exposure, are still very much in demand. The ratio of passive funds continued to rise in June, with seven of the top 10 funds now passive strategies.
At the top of our table, nothing changed from last month, and Fundsmith Equity, Vanguard LifeStrategy 80% Equity and Vanguard LifeStrategy 100% Equity remain in first, second and third place respectively.
Vanguard’s Mohneet Dhir recently spoke to interactive investor about the multi-asset Vanguard LifeStrategy fund range as part of our Fund Insider series.
In response to commentators’ criticism of the 60:40 equities/bonds portfolio model – which is how the Vanguard LifeStrategy 60% Equity fund (ranked seventh) is structured - and the fear that such as a model will be challenged in an environment of higher inflation, Dhir explained that: “Going forward, the role of bonds, and the 60:40 equity/bond mix will be even more important than it has been in recent history. The next 10 to 20 years are going to be different to what we’ve seen previously. We’re likely to see more uncertainty.
“Since the global financial recession, we’ve had a record amount of stimulus from central banks and that’s changing now. And what that means is more uncertainty in the market. Also we’re recovering post-Covid as well, globally. We’ve also got the highest geopolitical tensions that we’ve had in a long time. All these factors combined indicate the need for bonds being even higher than they have been in the past.”
- Watch the Vanguard videos here: Vanguard LifeStrategy: outlook for the next decade
- Watch the Vanguard videos here: Vanguard LifeStrategy funds: everything you need to know
Three of the Vanguard LifeStrategy funds – the 20%, 60% and 80% Equity options - are included in our Quick-start funds range aimed at beginner investors, and they also appear on our Super 60 rated list of investments.
Beyond the popular Life Strategy range, a trio of Vanguard tracker funds make up the mid-section of our table, with Vanguard FTSE Global All Cap Index in fourth place, Vanguard US Equity Index in fifth, and new arrival Vanguard FTSE UK Equity Income Index in sixth place.
The latter fund, which appears on ii’s Super 60 list, has risen in popularity due to investors hunting for income amid volatile markets. The UK stock market has many high-yielding stocks, including in the mining, energy and banking sectors. The Vanguard FTSE UK Equity Income Index fund tracks the FTSE UK Equity Income Index, which consists of common shares of companies listed on the London Stock Exchange that are expected to pay dividends that generally are higher than average. The stocks currently total 105, and include Glencore (LSE:GLEN), HSBC (LSE:HSBA), and National Grid (LSE:NG.).
There were two other new entries in June. The HSBC FTSE All-World Index, entered the table in eighth place, while the TB Guinness Global Energy fund joined in ninth place. The latter equity fund is a concentrated portfolio, with just 35 holdings, and the top 10, as of 31 May, includes oil and gas giants Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), Shell (LSE:SHEL), and BP (LSE:BP.). This year, the price of commodities and energy has risen, which has helped fuel record inflation.
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The FTF ClearBridge Global Infrastructure Income fund, also on ii’s Super 60 list, is in 10th place. Investors are looking to alternatives, which are defined as assets that fall outside conventional asset classes such as bonds and equites, not only to add diversification to their portfolios, but as a reliable source of regular income. In an inflationary environment, infrastructure offers protection against rising prices, due to its exposure to government-backed and inflation-adjusted income.
The funds that exited the top 10 in June were: Baillie Gifford American, L&G Global Technology Index, and the Vanguard FTSE Developed World ex-UK Equity Index.
Top 10 most-popular investment funds: June 2022
|Rank||Fund||IA sector||Ranking change since previous month||1-year return to 1 July (%)||3-year return to 1 July (%)|
|1||Fundsmith Equity||Global||No change||minus 11.3||19.54|
|2||Vanguard LifeStrategy 80% Equity||Mixed investment 40%-85% shares||No change||minus 5.78||13.78|
|3||Vanguard LifeStrategy 100% Equity||Global||No change||minus 3.91||21.21|
|4||Vanguard FTSE Global All Cap Index||Global||Up two||minus 5.4||22.94|
|5||Vanguard US Equity Index||North America||Down one||minus 3.44||34.9|
|6||Vanguard FTSE UK Equity Income Index||UK Equity Income||New entry||10.25||10.41|
|7||Vanguard LifeStrategy 60% Equity||Mixed investment 40%-85% shares||Down two||minus 7.51||8.23|
|8||HSBC FTSE All-World Index||Global||New entry||minus 4.03||24.89|
|9||TB Guinness Global Energy||Commodity/Natural Resources||New entry||43.19||18.78|
|10||FTF ClearBridge Global Infrastructure Income||Infrastructure||Down one||24.11||40.49|
Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of June.
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