Where are our clients investing their NISAs

Last week the Investment Management Association (IMA) revealed that retail investors pumped net inflows of £1.9 billion into UK-based investment funds in July, which was the first month of the enlarged £15,000 New ISA (NISA) allowance.

According to the IMA figures, UK Equity Income was the most popular sector, with £1 billion of net inflows, reflecting strong demand for income-generating investments at a time when interest rates and bond yields remain low. This was followed by Property funds (£304 million) – another income-generating asset class; while Sterling Strategic Bond funds rolled in as the third most popular sector with £274 million of net sales.

Managing Director Jason Hollands, takes a closer look at where Tilney Bestinvest clients have been investing their New ISAs since its launch and finds that for those using the company’s Online Investment Service to manage their own investments the picture is a little different, with greater diversification across sectors.

UK Equity funds proved most popular

“The most popular sector for our clients since the launch of the NISA is the UK All Companies sector representing 14% of inflows. Here the top choices of our self-directed investors were Liontrust Special Situations, AXA Framlington UK Select Opportunities, AXA Framlington UK Mid Cap, JO Hambro CM UK Opportunities and the HSBC FTSE 100 Index fund.

“UK Equity Income funds were a close-run second place representing 13% of our client inflows. Here the standout top choice was Threadneedle UK Equity Income fund. This was followed by the CF Woodford Equity Income fund, a new fund launched in June by former Invesco Perpetual manager Neil Woodford to much fanfare. Other popular choices were Artemis Income and Schroder Income Maximiser.”

"Flexible" bond funds in favour

“With interest rates currently at a record low but expected to rise over the coming year, we have long signalled the prospect of future adjustments in the bond markets that could mean higher yields but lower bond prices are to come. For some time we have highlighted the merits of strategic bond funds, those which have a significant degree of flexibility to adapt to changes. Such funds represented 11% of our client purchases since the launch of the NISA. Here the most popular funds were Kames Strategic Bond fund, M&G Optimal Income Fund, Henderson Strategic Bond, PFS Twenty Four Dynamic Bond and Fidelity Strategic Bond.”

A "defensive" approach

“July and August also saw signs of a more cautious approach by some investors, possibly as a result of geopolitical flash points including the crisis in Ukraine, Gaza, Iraq and Libya hitting the headlines. Targeted Absolute Return funds, those which seek to deliver positive returns across market conditions and with low volatility, proved popular. It should be noted that these investments vary significantly in terms of risk and volatility and returns are not guaranteed. Targeted Absolute Return funds represented almost 9% of client purchases. Almost half of inflows into such funds went into the five star rated Standard Life Investments Global Absolute Return Strategies fund. Other popular choices in this area were Threadneedle UK Absolute Alpha, Insight Absolute Insight, Jupiter Absolute Return and FP Argonaut European Absolute Return.”

Asia back on the radar

“After a tough 2013, there are signs that Asia Pacific ex Japan and Global Emerging Market funds are once again back on the radar with investors and these markets have performed well year to date. The most popular Asia Pacific ex Japan fund was the First State Asia Pacific Leaders, while Lazard Emerging Markets took pole position among investors into Global Emerging Market funds.”

Is QE coming to the Eurozone?

“Although the economic headlines surrounding the Eurozone have been increasingly dire, with growth stalling, inflation worryingly low and a political crisis bubbling away in France, European equity funds continued to attract new inflows from clients as expectations have grown that the European Central Bank will introduce major stimulus measures. Here the top choice among our clients was the Threadneedle European Select fund, followed by Henderson European Focus and Standard Life European Income.”

Trackers top choice for US exposure

“US equities have presented a dilemma for investors this year. After a setback in the first quarter, the economic recovery appears to have got back on track and the US stock market has proved buoyant, with the S&P 500 Index reaching a record high. Yet US equities look expensive. The overwhelming top choice for our clients among US funds was the HSBC American Index Fund, a low-cost index tracker. This was followed by Legg Mason US Smaller Companies and Aviva US Equity Income II.”

Letting the experts manage your investments

“Finally, a number of self-directed clients chose to delegate their underlying fund choices to our investment team by investing in one of our five Multi-Asset Portfolio (MAP) funds, with the IFSL Bestinvest Growth portfolio making the list of 20 most popular funds. Each of the MAP funds invests in around 20 funds selected by our research team and across a range of asset classes, with the mix of each fund aimed to suit different objectives and risk profiles. We do not apply ratings to funds we manage ourselves, but our Multi-Asset Portfolios do invest in underlying funds that typically have five or four star ratings from our research team and the MAP funds themselves have been awarded a five star rating from research firm Defaqto. To find out more about our MAP funds click here.”

20 most popular funds for Tilney Bestinvest clients since the launch of the New ISA:

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Important information:

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. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.

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. Please note that historical or current yields or returns should not be considered reliable indicators of future performance.

Press contacts:

Jason Hollands
0207 189 9919
07768 661 382
Jason.hollands@bestinvest.co.uk

Roisin Hynes
020 7189 2403
07966 843 699
Roisin.hynes@bestinvest.co.uk

About Tilney Bestinvest

Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including UK Wealth Manager of the Year, Low-cost SIPP Provider of the Year and Self-select ISA Provider of the Year 2013, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Bestinvest employs almost 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.

The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.

For further information, please visit: www.tilneybestinvest.co.uk