Terry Smith triumphs in the battle of the investment Big Beasts14 December 2016
Bestinvest reveals the most popular funds in 2016
2016 has been a rollercoaster year for investors against the backdrop of the UK voting to leave the EU and election of outspoken property mogul and reality TV star Donald Trump as the next U.S. President. As such a tumultuous year draws to an end, online investment platform Bestinvest has revealed which investments proved the most popular during the year with clients who make their own investment decisions.
At a glance: The most popular funds selected by clients using the Bestinvest Online Investment Service in 2016 (excluding Tilney Bestinvest fund of funds):
Jason Hollands, Managing Director at Bestinvest, comments:
“This has been a year when bond funds were largely absent from the most popular investments selected by our clients and property funds dropped off the radar too. Instead we saw a very clear preference for highly seasoned active equity fund managers across most sectors. The exception was North America where clients have firmly favoured a low cost passive investment approach which is understandable given the abysmal track record of active fund managers in this market.”
“At the top of the popularity table was the Fundsmith Equity fund, managed by City veteran and prominent Brexiteer Terry Smith. He’s developed a considerable fan club of investors who like his no nonsense buy-and-hold approach and the fact that he doesn’t sit on the fence with his views. The performance has been stellar since launch and the fact that Terry ploughed an additional £115 million of his own spare cash into the fund during the year, taking his personal interest in the fund to over £200 million, is a big vote of confidence in the portfolio of global blue chip companies he holds.”
“In second place was Neil Woodford’s CF Woodford Equity Income fund – towering at £9.3 billion in size despite only launching two years ago. Second place in 2016 is quite an achievement when according to Investment Association data, UK equity funds have been consistently out of favour with retail investors.”
“Emerging market equities and Asian markets have had a tumultuous year, but they rebounded strongly over the summer after a shaky start to the year so it is unsurprising to see Stewart Asia Pacific Leaders, a longstanding top rated fund, have a high placing in the list. The management of the fund is now firmly in the hands of David Gait with Angus Tulloch having handed over the reins in the summer. The investment approach, however, remains consistent and the team continues to have the highest weighting to India, of 24.7%, with Taiwan 18.5% the next largest weighting.
“In fourth place the Threadneedle UK Equity Income fund is another great choice for core UK equity exposure. Manager Richard Colwell has a pragmatic approach, and his fund currently has a defensive skew that focuses on total return. It is currently very underweight financials compared to its FTSE All-Share benchmark, and in the last three months he has increased its position in AstraZeneca, while reducing its stake in retailer Marks and Spencer.
“The Threadneedle European Select fund manager Dave Dudding was joined this year by co-manager Mark Nichols who joined from BMO Global Asset Management. The fund retains its bias to consumer goods, with healthcare, consumer services and chemicals also areas of focus. Financials are a considerable underweight due to concerns over the European banking sector. The fund aims to seek out companies with strong brands that are less sensitive to price-based competition and as such the fund invests heavily in firms such as Unilever, the multinational consumer goods company, and the world’s largest brewer Anheuser-Busch InBev.
“Managed by Julian Fosh and Anthony Cross, the Liontrust Special Situations fund has long held a highly coveted five-star rating from our research team and has managed to achieve both significant and consistent outperformance over the long term, but with less volatility than the UK market. The fund follows a well-articulated process, called the Economic Advantage approach, that looks for companies able to sustain a higher than average level of profitability for longer than expected. The companies the fund invests in have distinct characteristics, like ownership of intellectual property, strong distribution channels or significant recurring revenue streams whether they are large, medium sized or smaller companies. Top holdings include takeaway franchise Domino’s Pizza, quality assurance group Interlek and professional services data provider RELX.
“The HSBC American Index fund is a tracker fund that follows the S&P 500 index, which is notoriously hard for active managers to beat. Over the last five years managers of US equity funds have struggled to keep up with a bull market in US shares lifted on a tide of cheap money. No wonder, then, that many investors have given up entirely on active funds for their US exposure, choosing low-cost trackers instead.
“The AXA Framlington UK Select Opportunities fund is run by veteran stock-picker Nigel Thomas who has been managing funds in the UK All Companies sector for over 28 years. Thomas revealed his simple tips for good fund management: “using your eyes and ears” and “a good memory”. He does not invest in contractors, housebuilders, airlines or hotels because of a combination of low margins and low barriers to entry, preferring instead to stick with well-known consumer brands with strong cash flow generation. Reflecting this, his fund’s top holdings include sports gaming group Paddy Power Betfair, ITV and Dixons Carphone.
“The Legg Mason Japan Equity fund is the top-performing Japan fund over multiple timeframes and is managed by Tokyo-based Hideo Shiozumi, a veteran with three decades experience managing Japanese equities. His focus is ‘New Japan’, growth companies in sectors such as healthcare and information technology companies that can meet the widespread challenges presented by such an aging population. This year UK investors in Japanese equity funds have benefitted heavily from currency movements as the Yen has strengthened sharply versus Sterling.”
“Finally, while industry-wide data suggests targeted absolute return funds were very popular this year with overall retail investors, only one such fund, the Standard Life “GARS” fund, made it into the top ten choices with our clients. GARS is the market leader in this space, though there are now a number of rival funds now challenging it from the likes of Aviva and Invesco Perpetual.”
The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This press release does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers. Past performance is not a guide to future performance.
Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing.
Underlying investments in emerging markets are generally less well-regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could both increase or decrease. These investments therefore carry more risk.
Smaller companies shares can be more volatile and less liquid than larger company shares, so smaller companies funds can carry more risk. The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.
Tracker funds track the performance of a financial index and as such their value can go down as well as up, much like shares, and you can get back less than you originally invested. Some are more complex so you should ensure you read the documentation provided to ensure you fully understand the risks.
Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years. Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.
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