Vanguard dominant, Terry Smith sticks to his knitting, a new entry, and interest in commodities.
Fundsmith Equity retained its position in March as the most-popular fund with customers of interactive investor (ii).
In March, Fundsmith held its annual shareholders’ meeting (AGM). Manager Terry Smith discussed holdings in PayPal (NASDAQ:PYPL) and Meta (NASDAQ:FB), and made it clear to his investors that despite the rotation from growth to value stocks, he is sticking to his investment philosophy, saying: “Bad business do not become good ones. We are never going to own banks or energy stocks. Good business can keep competitors out and are worth paying for.” Our deputy collectives editor Sam Benstead shares more of Smith’s comments from the AGM, including on investments in Amazon (NASDAQ:AMZN) and Unilever (LSE:ULVR), here.
There’s little change in the top 10 table compared to the previous month, which is unsurprising given that ii customers have likely been topping up their stocks and shares ISAs and Junior ISAs (JISAs) ahead of the 5 April 2022 deadline for this tax year. Perennially popular passive multi-asset fund Vanguard LifeStrategy 80% Equity held firm in second place, while the 100% Equity and 60% Equity options are in third and fourth place, respectively.
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Vanguard dominates March most-bought table and another passive play, Vanguard US Equity Index (seventh place), appears in our Super 60 list of rated investments. This fund tracks the performance of the S&P Total Market Index and its ongoing charges are 0.1%, making it a cheap way to access the entire US equity market. The low-cost Vanguard FTSE UK Equity Income Index fund, which has ongoing charges of 0.14%, is also in ii’s Super 60 list and is 10th in the table. The passive fund physically invests in the constituents of the FTSE UK Equity Income Index, and the current dividend yield is 4.9%.
In one of our most-recent Funds Fan podcasts, deputy collectives editor Sam Benstead discusses where he invests. One of the four funds he owns is L&G Global Technology Index, which is in fifth place in our top 10 list this month. The passive fund tracks about 250 technology stocks for 0.32% in annual fees.
Benstead says: “In technology, big is beautiful, be it search bots getting smarter, so crowding out competition, economies of scale in building cloud computing networks, or having the cash to invest in emerging areas, such as artificial intelligence, the biggest companies, I think, are going to be the ones that are going to profit the most in the future. By investing in an index, it’s going to keep buying more shares in companies as they get bigger.”
Actively managed fund JPM Natural Resources was the only newcomer to the top 10, entering in ninth place. Commodity prices have risen due to Russia’s war in Ukraine, which has boosted natural resources funds, such as JPM Natural Resources. Its one, three and five-year performance figures to date are 43.1%, 54.1% and 68%, respectively. As oil and gas prices recovered following mass Covid vaccination programmes and the reopening of economies, they have been pushed even higher following sanctions on supplies from Russia.
JPM Natural Resources’ top 10 holdings include Rio Tinto (LSE:RIO), Shell (LSE:SHEL), Chevron (NYSE:CVX), and BHP (LSE:BHP), and its biggest exposure is to North America (57.4%), followed by the UK (13.2%). In the latest monthly market commentary (28 February), JPMorgan said: “The fund outperformed its benchmark, the EMIX Global Mining & Energy, over the month [but] Russian-listed companies feature most heavily in terms of stock contribution and detraction. Underweight positions to the Russian oil and gas company, Gazprom, and nickel mining company Norilsk Nickel both contributed to overall returns. Meanwhile, any Russian holdings in the portfolio, such as LUKOIL and Polymetal, were among the leading detractors. Any Russian holdings in the portfolio were reviewed in light of the situation.”
Data from the Investment Association (IA) shows that the global fund sector has for the past four years been a bestseller among retail investors. Global funds in our top 10 table include passive fund Vanguard FTSE Global All Cap Index (sixth place), which tracks the performance of the FTSE Global All Cap Index. The index is made up of large, mid-sized and small company shares in both developed and emerging markets.
Baillie Gifford American, which has fallen three places to eighth on last month, is suffering amid the market rotation from growth to value shares, as its performance figures in the table below reveal. But in a commentary on the fund published in March, Baillie Gifford’s client service director Fraser Thomson was optimistic, saying: “Accelerating disruption across almost every industry provides us with a broadening range of new investment opportunities. Businesses including Rivian (NASDAQ:RIVN), the electric vehicle manufacturer, and Ginkgo Bioworks (NYSE:DNA), the synthetic biology business, are both at an early stage of development and divide opinion because of the range of possible outcomes.”
Thomson added: “Rivian’s electric pick-up trucks and sports utility vehicles (SUVs) could accelerate the shift away from internal combustion engines in a large and profitable section of the market. Ginkgo could remap a host of industrial processes from chemical drivers to biological ones. The upside available if these companies deliver is considerable. With huge industries such as energy, healthcare, retail and enterprise software being revolutionised, this is a wonderful time to be a growth investor.”
Rathbone Global Opportunities fund exited the top 10 in March.
Top 10 most-popular investment funds: March 2022
|Rank||Fund||IA sector||Ranking change since previous month||1-year return to 1 April (%)||3-year return to 1 April (%)|
|1||Fundsmith Equity||Global||No change||9||42|
|2||Vanguard LifeStrategy 80% Equity||Mixed investment 40%-85% shares||No change||7.1||30.1|
|3||Vanguard LifeStrategy 100% Equity||Global||No change||11||38|
|4||Vanguard LifeStrategy 60% Equity||Mixed investment 40%-85% shares||No change||4.1||23|
|5||L&G Global Technology Index||Technology & Telecommunications||Up one||17||110.1|
|6||Vanguard FTSE Global All Cap Index||Global||Up two||10||44|
|7||Vanguard US Equity Index||North America||Up two||15.1||61|
|8||Baillie Gifford American||North America||Down three||-23.1||75.1|
|9||JPM Natural Resources||Commodities and Natural Resources||New entry||43.1||54.1|
|10||Vanguard FTSE UK Equity Income Index||UK Equity Income||Down two||20||16|
Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of March.
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