Funds managed by Terry Smith and Neil Woodford have topped the list of the most popular investment vehicles this year, while demand for bond and property funds dropped.
Research by Tilney Bestinvest, which looked at funds chosen by clients using the Bestinvest Online Investment Service, was against a backdrop of a tumultuous year for investors with the UK's shock Brexit vote and Donald Trump’s victory as the next US president.
Despite this tricky year for markets, the £8.7bn Fundsmith Equity fund run by Terry Smith topped this year's leaderboard, helped by its stellar performance.
Over the past three years the fund has returned nearly 81 per cent against the IA Global sector, which has returned 36 per cent, FE figures show.
Jason Hollands, managing director at Tilney Bestinvest, said: “Mr Smith has 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.”
He also pointed out that Mr Smith has ploughed an extra £115m of his own spare cash into the fund during the year, taking his personal interest in the fund to over £200m.
“This is a big vote of confidence in the portfolio of global blue chip companies he holds.”
Woodford Investment Management’s flagship £9.3bn Equity Income fund came second place in the Tilney Besinvest popularity table, despite launching just two years ago.
Mr Hollands said second place is “quite an achievement”, particularly bearing in mind data from the Investment Association found UK equity funds had been consistently out of favour with retail investors throughout the year.
Emerging market equities and Asian markets had a tumultuous year but they rebounded strongly over the summer after a shaky start to the year, the Bestinvest director said.
He said it was therefore “unsurprising” to see the Stewart Asia Pacific Leaders fund coming third place on the list.
While the fund changed management in the summer and is now in the hands of David Gait with Angus Tulloch, Mr Hollands said the investment approach remains consistent.
Mr Hollands also pointed out 2016 has been a year when bond and property funds were largely absent from the most popular investments selected by Tilney’s clients.
“Instead we saw a very clear preference for highly seasoned active equity fund managers across most sectors.”
However, the exception was North America, where savers have firmly favoured a low-cost passive investment approach, which the Tilney director said is understandable given the “abysmal” track record of active fund managers in this market.
The most popular funds selected by clients using the Bestinvest Online Investment Service in 2016 (excluding Tilney Bestinvest fund of funds):
| Fund name | Tilney Bestinvest rating |
1. | Fundsmith Equity | «««« |
2. | CF Woodford Equity Income | ««« |
3. | Stewart Investors Asia Pacific Leaders | ««««« |
4. | Threadneedle UK Equity Income | ««««« |
5. | Threadneedle European Select | ««««« |
6. | Liontrust Special Situations | ««««« |
7. | HSBC American Index | ««« |
8. | AXA Framlington UK Select Opportunities | ««««« |
9. | Legg Mason IF Japan Equity Fund | ««« |
10. | Standard Life Global Absolute Return | ««««« |
11. | Fidelity MoneyBuilder Income | ««««« |
12. | Vanguard Life Strategy 80% Equity | Unrated |
13. | Artemis Global Income | «««« |
14. | Lindsell Train Global Equity | Unrated |
15. | Lloyds Banking Group PLC | Unrated |
Ben Yearsley, investment director at the Wealth Club, said there are no massive surprises in the list, adding: “The Fundsmith fund has had a great year, as many overseas and global funds have, on the back of sterling weakness.”
Figures from Tilney show Standard Life Investment’s £27bn Global Absolute Return Strategy (Gars) coming 10th place in the popularity list.
Mr Yearsley said the continuing popularity of Gars was interesting, bearing in mind it's made a loss of over 3.6 per cent over the past year.
He said this may have been driven by investors looking for safe havens, but added: “The lack of performance will only be tolerated for so long before investors start withdrawing money in big numbers.”
The Wealth Club director also said he was slightly surprised there aren't more conservative funds in the list.
“Anecdotally you hear stories about risk reduction and investors moving out of equities, but there aren't really any signs of it here," he said.
“It's good to see investors aren't abandoning UK equities either, having core equity income has served investors well for many years.”
