Three new names have entered our monthly list of most-bought funds.
Private investors appear to have followed in the footsteps of Warren Buffett by gaining some exposure to Japan last month, perhaps in a desire to diversify as Covid-19 disruption rumbles on, the prospect of a hard Brexit persists, and in response to the upcoming US presidential election.
Two of the three new entries in our monthly ranking of the top 10 most-bought funds, according to data from interactive investor’s platform, are actively managed Japan funds: Baillie Gifford Japanese Smaller Companies (sixth place) and Legg Mason IF Japan Equity (10th place). The former fund counts legal consultation portal Bengo 4, delivery services firm Demae-Can and Cosmos Pharmaceutical among its portfolio names, while the latter fund’s top five holdings include mergers and acquisitions specialist Nihon M&A, healthcare company M3 and gaming giant Nintendo.
The world’s third-largest economy appears to be an attractive place to invest given that Japan’s new prime minister Yoshihide Suga is considered unlikely to stray from “Abenomics”, a package of economic reforms begun by his predecessor, which included a new corporate governance code.
In a recent interactive investor podcast, Nicholas Weindling, fund manager of the JPMorgan Japanese Investment Trust (LSE:JFJ), explains how despite widespread perceptions of Japan as a technologically advanced nation, it is lagging other developed-world countries in certain areas. For investors, this is presumably a positive and suggests there is potential for significant growth in areas such as e-commerce.
The other new fund to enter the list was Baillie Gifford China (fifth place). China’s dramatic and seemingly V-shaped recovery following the body blow of the pandemic was announced in figures released at the end of last month showing that it is the first country to start growing again after Covid-19. Whether these statistics can be trusted is another matter, but the country’s apparent rebound is remarkable. Baillie Gifford China’s top five holdings include food delivery app Meituan (SEHK:3690), insurer Ping An (SEHK:2318), and Jack Ma co-founded e-commerce giant Alibaba (NYSE:BABA).
While the appearance of three new funds in the list is striking, fund house Baillie Gifford dominated the ranking with six entries. Interest in Baillie Gifford American shows no sign of waning, which given its exceptional performance is no surprise, and the fund has retained its second-place position from last month. Baillie Gifford American has benefited from heavy exposure to firms including Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA), and investors appear to have shrugged off concerns from media commentators about the prospect of more stringent regulations in the event of a Joe Biden victory in this week’s presidential election. A recent poll carried out by interactive investor actually shows that the US election ranks low in a list of investor priorities, with one in four believing that the US tech giants are more powerful than any US president.
- Baillie Gifford American: owning Tesla and more top stocks
- How Baillie Gifford American became a star fund
- US election poll: here’s what you think of Trump and Biden
Environmental, social and governance (ESG) fund Baillie Gifford Positive Change remained in third place, while Baillie Gifford Global Discovery rose one place to fourth. Baillie Gifford Long-Term Global Growth was the only faller, dropping three places to ninth place.
Vanguard’s two passive funds Vanguard LifeStrategy 80% Equity and Vanguard LifeStrategy 60% Equity are long-standing presences in our most-bought list, and in October they were in seventh and eighth place, respectively, although the 80% Equity option has slipped three places since September.
However, seemingly immovable from the top of the table, Terry Smith’s Fundsmith Equity is still the firm favourite among retail investors. The global equity fund was the subject of our most recent Fund spotlight article, in which an ii analyst deemed the fund to be “positioned in such a way [as] to be resilient to changes, such as technological disruption”. An attractive view if ever there was one.
Top 10 most popular funds: October 2020
|Rank||Fund||IA sector||Ranking change since previous month||One-year return to 2 Nov (%)||Three-year return to 2 Nov (%)|
|1||Fundsmith Equity||Global||No change||13.89||44.19|
|2||Baillie Gifford American||North America||No change||102.54||175.06|
|3||Baillie Gifford Positive Change||Global||No change||70.15||113.86|
|4||Baillie Gifford Global Discovery||Global||Up 1||60.94||100.41|
|5||Baillie Gifford China||China||New entry||58.05||57.88|
|6||Baillie Gifford Japanese Smaller Companies||Japanese Smaller Companies||New entry||25.74||49.82|
|7||Vanguard LifeStrategy 80% Equity||Mixed investment 40%-85% shares||-3||0.01||12.07|
|8||Vanguard LifeStrategy 60% Equity||Mixed investment 40%-85% shares||No change||1.55||12.78|
|9||Baillie Gifford Long-Term Global Growth||Global||-3||97.65||139.1|
|10||Legg Mason IF Japan Equity||Japan||New entry||35.18||59.98|
Source: Interactive investor, FE Analytics and Morningstar. Note: the top 10 is based on the number of “buys” during the month of October.
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