Which were the most popular funds with our clients in July 2017?

Jason Hollands, of Bestinvest, Tilney Group’s platform for self-directed investors, looks at which funds and shares proved the most popular with clients using the Bestinvest Online Investment Service in July.

At a glance: The most popular funds selected by clients using the Bestinvest Online Investment Service in July 2017:

¹As a matter of policy Bestinvest does not star-rate Tilney’s 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: “While Investment Association figures for the funds industry published last week have shown a strong preference for fixed income, targeted absolute return and money market funds in recent months, our own data for clients who make their own decisions paints a very different picture. Once again there was not a bond fund in sight when it came to the most popular funds purchased during the month. “The investment choices made by Bestinvest clients in July proved to be consistent with the pattern in recent months: a heavy preference for equities and choices dominated by seasoned active fund managers. The top six funds remain the same as the previous month.

“Once again, Terry Smith’s Fundsmith Equity fund came out on top, a position it has held for over a year. Terry Smith has an invest-and-hold strategy focused on a concentrated portfolio of quality growth stocks from across developed markets. The fund has recently exited jam and peanut butter maker J M Smucker after 21 months, one of the shortest holding periods the fund has had for a stock since launch, which has reduced the portfolio to 29 holdings.

“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.

“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 eponymous CF Woodford Equity Income fund, managed by Neil Woodford, has consistently appeared in the top 10 list since it was launched. Woodford has been in the news recently with a number of his top holdings including the AA, Astrazeneca and Provident Financial hit by disappointing news flow. Despite this, his three year numbers remain strong and a manager should be judged on their long-term record, not a tough couple of weeks. We suspect his loyal fan club will keep faith in him.

“One fund that continues to be popular within the Asian space and draw support from clients is the Stewart Asia Pacific Leaders, a longstanding top rated fund. The fund has just reached its first full year under the management of David Gait, who took up the baton from veteran manager Angus Tulloch. The fund has significantly lagged the benchmark over this year due to its high weighting to India (30.4%) and negligible exposure to China, biases that were in place long before the management handover. China and South Korea markets have performed incredibly strongly this year. The approach remains very consistent with long-term time horizons taken when backing companies’ ‘sustainability’, an imbedded part of the investment process, and it has a bias to financially robust companies with high net cash resources.

“The Threadneedle European Select fund, run by Dave Dudding and Mark Nichols, is consistently in our top 10 list. This fund retains a bias to the consumer goods, healthcare and consumer services sectors. 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 the world’s largest brewer, Anheuser-Busch InBev, and beverage company Pernod Ricard. It also holds large positions in consumer goods companies L’Oreal and Unilever.

“The HSBC American Index has been in and out of our top ten list recently, reappearing last month in the tenth spot and this month creeping up to seventh. The fund is a tracker fund that follows the S&P 500 index, has been the most popular choice 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 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 companies Unilever and Marks and Spencer.

“This is the first appearance for the Vanguard LifeStrategy 80% Equity Fund in our top 10 list for 2017. The fund invests 80% in equities and 20% in fixed income through Vanguard index trackers. The highest allocation within equities is to the US, where valuations look very expensive compared to longer-term trend.

“The Lindsell Train Global Equity fund recently celebrated its fifth birthday. The fund, run by experienced management duo Michael Lindsell and Nick Train, invests in a concentrated portfolio of durable, cash-generative business franchises which are held for the long term. The biggest holdings in the fund are the well-known household names like of Nintendo, Heineken and Guinness owner Diageo, which although they note are often deemed to be ‘boring, over the long term ‘boring’ wins out.”

“While Bestinvest clients predominately choose funds, they can also purchase shares and investment trusts through the service. Embattled support services and construction giant Carillion, was – surprisingly – the most popular purchase in July, as clients piled in following a profit warning at the start of the month which saw its shares nose dive. Time will tell whether they have snatched themselves a bargain or if Carillion’s financial woes are set to continue.”

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. 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.

We aim to provide investors with information to help them make their own investment decisions although this should not be construed as advice or an investment recommendation. If you are unsure about the suitability of an investment or if you need advice on your specific requirements, we strongly suggest that you consider professional financial advice.

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.