The star sellers of the ISA season19 April 2017
With the new tax year now in full swing, we can reflect on an ISA season that took place against a cacophony of noise about the new US administration of Donald Trump and developed stock market indices scaling to record high levels.
At a glance, investors using the Bestinvest online investment service stuck with proven managers with strong long term track records. Income funds focused on cash generating companies able to pay-out regular dividends also proved popular at a time when nudged higher.
Below, Jason Hollands, Managing Director at Tilney Group, counts down in detail the top 15 most popular funds with clients using the Bestinvest Online Investment Service during the 2016/17 tax year.
*As a matter of policy Tilney does not star-rate its own in-house managed Multi-Asset Portfolio funds. However each of these invests in a diversified selection of circa 20 top-rated underlying funds selected by the Tilney research team.
Hollands comments: “During this tax year 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. Bestinvest clients just can’t get enough of tell-it-like-it-is manager Terry Smith who recently came in to update us on the fund. Smith believes that trying to predict market and economic events is a fool’s game and told us: “I deploy most of my time and effort on things I can control. Two of those are whether we own good companies and what valuation we pay to own their shares”. He has an invest-and-hold strategy focused on a concentrated portfolio of 29 quality growth stocks from across developed markets. He sums this up as: “Buy shares in good companies; don’t overpay; do nothing.” He currently has Microsoft, Pepsico and Paypal among his top ten holdings. The fund has a high weighting to consumer staples, 34.4%, healthcare, 28.3%, and technology, 23.1%.
“The Tilney Bestinvest Growth was the second most popular fund and is a ready-made portfolio for investors with a long investment time horizon. It invests into a portfolio of funds and ETFs selected by our research team which include the likes of JO Hambro UK Opportunities, Liontrust Special Situations, Majedie UK Equity, Vanguard S&P 500 ETF and Artemis European Opportunities. 56% of the portfolio is invested in equities, with the remainder in absolute return funds, bonds, commercial property and gold.
“In third place was Neil Woodford’s flagship CF Woodford Equity Income fund – towering at £9.7 billion in size despite only launching two years ago. While this fund does dabble in riskier small growth businesses, it primarily focuses on resilient companies that are less affected by the global economic cycle and are more in charge of their own destiny. Longstanding top holdings include healthcare multinationals AstraZeneca and GlaxoSmithKline, and he continues to invest very significantly in the tobacco industry with big positions in industry giants Imperial Brands and British American Tobacco.
“Emerging markets and Asian equities have posted strong returns over the last year notwithstanding some of the noise around President Trump’s campaign rhetoric on raising import tariffs to protect American jobs. One fund in this space that continues to draw support from clients however is the Stewart Asia Pacific Leaders, a longstanding top rated fund. The fund, managed by David Gait, focuses primarily on investing in large companies with sustainable cash flows and robust balance sheets. Its highest weighting remains India (31.6%) followed by Taiwan (17.8%) but it has negligible exposure to China where concerns persist about the growth of rapid growth of debt.
“The Tilney Bestinvest Aggressive Growth Portfolio takes a more adventurous investment approach than the Growth portfolio, with a larger exposure to shares in small companies and overseas companies. It is also designed for investors with a high tolerance for risk and a long investment time horizon.
“The Threadneedle UK Equity Income fund is another popular choice for core UK equity exposure. Manager Richard Colwell has a pragmatic approach, focused on total return rather than yield per se. The fund is currently very underweight financials and overweight industrials compared to its FTSE All-Share benchmark. Companies within its top ten holdings include healthcare multinationals GlaxoSmithKline and AstraZeneca, and consumer goods company Unilever which recently foiled a potential bid from Heinz Kraft.
“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.
“US equity funds have seen increased interest since the election of Donald Trump as US President as investors bet on a combination of aggressive tax cuts, deregulation and massive infrastructure spending to boost the US economy. Some of that agenda is now in doubt following the failure of the administration to win support to replace President Obama’s healthcare reforms, but either way the US represent over half of global equity markets by size so should be a key component in a long-term portfolio. The HSBC American Index fund, a tracker that follows the S&P 500 index, has been the most popular choice for Bestinvest clients investing in the U.S. The US stock market is notoriously hard for active fund managers to beat and this tracker has a very low ongoing charges figure of 0.08%.
“The Threadneedle European Select fund manager Dave Dudding was joined during the tax 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.
“The Artemis Global Income fund, has certainly returned to favour recently with Bestinvest clients. Manager Jacob de Tusch-Lec takes an unconstrained approach to investing in global equities, unencumbered from shadowing an index. This means its top holdings are typically very different from competitor funds which are usually dominated by giant US companies. Instead, this fund's top holdings include the likes of Norwegian insurance company Storebrand, Italian communication infrastructure company EI Towers, Italian telecom company INWIT and US lender Zions Bank. This fund has a much higher weighting to medium sized and smaller companies than most global funds. Tusch-Lec believes the global economy is shifting from a deflationary to reflationary environment and has adjusted the portfolio to reflect this.”
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 article 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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