Top 10 popular funds: July 2019
A weak pound means US and global funds dominate the most-bought list on the ii platform.
6th August 2019 12:23
by Kyle Caldwell from interactive investor
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A weak pound means US and global funds dominate the most-bought list on the interactive investor platform.
Despite repeated warnings over the past couple of years from various investment commentators that the strong performance US equities have enjoyed since the financial crisis is looking long in the tooth, the S&P 500 index has continued climbing.
Moves at the end of July by the Federal Reserve, the US central bank, to cut interest rates for the first time in 11 years will in theory help prolong the longest US bull market in history.
However, it is worth flagging that US markets fell once the rate cut was announced as investors expected the rate cut to be more aggressive, and also flag up that further cuts may be made in the coming months.
Nonetheless, on the whole, markets tend to react positively when interest rates are either cut or are low relative to history.
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There are a number of reasons for this, but one of the main factors is the relative attraction of equities compared with the other two main options – bonds and cash.
Moreover, the interest rate cut was widely regarded as a clever move by the Federal Reserve to ensure the US economy remains in good health.
Another key factor behind the increased appetite for US funds – and indeed a central reason why global funds are so well represented in the top 10 – is the weak pound, which has led investors to seek non-sterling assets.
Ahead of the US rate cut, which was widely expected, UK investors gave their stamp of approval by increasing their exposure to US equities.
Figures from the Investment Association, the trade body for the fund management industry, show that North America was the top-selling fund sector, pulling in £265 million in the month of June.
Increased investor demand for US funds is also apparent in data from Money Observer's parent company, interactive investor, as Baillie Gifford American was the sixth most popular fund purchased in July, up from 18th place in the month of June. Also in the top 10 was Vanguard US Equity index, albeit slipping one place to eighth spot.
In addition, global funds tend to have a big slice of their portfolios to the US, and this certainly rings true in the case of Baillie Gifford Global Discovery, the other new entrant to the top 10. It has two-thirds of the portfolio in the US, with healthcare and technology the two main areas of focus.
In October 2017, research by Money Observer found that funds that sit in the IA's global sector had on average 47% of their assets in US shares – more or less in line with the MSCI World index (53% weighted to the US at the time), a benchmark many funds in the sector pitch themselves against. Â
In total, there are five global funds in the top 10, the others being Fundsmith Equity, once again in top spot, followed by Lindsell Train Global Equity retaining the silver medal. AXA Framlington Global Technology is in seventh, while Vanguard LifeStrategy 100% Equity is ninth.
Both US and global funds have benefited from the weakness of sterling, points out Rebecca O'Keeffe, head of investments at interactive investor. She adds:
"Holding international shares, in particular US stocks, has been a great success for UK investors over the past few years, who have benefited from both the strength of the US market and the weakness in sterling."
In recent weeks, O'Keeffe notes, "the increased rhetoric and potential prospect of a no-deal exit from Europe has pushed sterling lower over the past month, giving a boost to overseas holdings and global funds".
Two other funds from the Vanguard LifeStrategy stable are in the top 10: Vanguard LifeStrategy 80% Equity and Vanguard LifeStrategy 60% Equity are in third and fourth place, respectively.
These funds are favoured in particular by cost-conscious investors, as the ongoing charge figure is just 0.22% (although this does not include the fund's trading costs).
The five funds in the range invest in various indices, with the equity weighting ranging from 20% to 100% and the balance held in bonds and cash.
Also in the top 10 is Lindsell Train UK Equity, falling from fourth to fifth. On the whole, UK funds continue to be given the cold shoulder by both retail and institutional investors, with Brexit blues largely to blame.
Top 10 bought funds July
| Rank | Fund | IA sector | Change since June | 1-year return (to 5 Aug) | 3-year return |
|---|---|---|---|---|---|
| 1 | Fundsmith Equity | Global | - | 20.70% | 67.30% |
| 2 | Lindsell Train Global Equity | Global | - | 21.90% | 81.30% |
| 3 | Vanguard LifeStrategy 80% Equity | Mixed Investment 40%-85% Shares | - | 7.30% | 33.90% |
| 4 | Vanguard LifeStrategy 60% Equity | Mixed Investment 40%-85% Shares | 1 | 7.70% | 26.90% |
| 5 | LF Lindsell Train UK Equity | UK all companies | -1 | 16.90% | 52.50% |
| 6 | Baillie Gifford American | North America | New entry | 16.30% | 99.20% |
| 7 | AXA Framlington Global Technology | Global | -1 | 22.40% | 107.80% |
| 8 | Vanguard US Equity Index | North America | -1 | 12% | 55.70% |
| 9 | Vanguard LifeStrategy 100% Equity | Global | -1 | 7% | 41% |
| 10 | Baillie Gifford Global Discovery | Global | New entry | 13.20% | 83.20% |
Source: interactive investor and Morningstar
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
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.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â 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.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.