Advisers on Fundsnetwork platform were placing client cash into passive and global funds more than any other type last month in a sign they are increasingly focusing on their financial planning and "allowing investment strategies to run on auto-pilot in the background".
The latest sales figures from the platform, released today (September 24), showed Vanguard’s LifeStrategy 40% Equity fund — a passive fund — was the leading fund for adviser sales overall as well as the bestselling Isa in August.
Vanguard’s 60% Equity fund, another passive fund, also performed well as the second most sold Isa and the fourth most sold fund overall.
|Top 10 adviser sales by fund||Isa bestsellers|
|Rank||Fund Name||Fund Name|
|1||Vanguard LifeStrategy 40% Equity Fund||Vanguard LifeStrategy 40% Equity Fund|
|2||Royal London Sustainable Diversified Trust||Vanguard LifeStrategy 60% Equity Fund|
|3||LF Lindsell Train UK Equity Fund||Royal London Sustainable Diversified Trust|
|4||Vanguard LifeStrategy 60% Equity Fund||Liontrust Special Situations|
|5||Lindsell Train Global Equity Fund||Royal London Sustainable World Trust Inc|
|6||Baillie Gifford Strategic Bond||LF Lindsell Train UK Equity Fund|
|7||Liontrust Special Situations||Royal London Short Duration Credit Fund|
|8||Royal London Sustainable World Trust Inc||Lindsell Train Global Equity Fund|
|9||CFP SDL UK Buffettology Fund||Baillie Gifford Strategic Bond|
|10||Fundsmith Equity||Fundsmith Equity|
Passive funds are funds where the fund manager attempts to mimic a benchmark by replicating its holdings and, hopefully, its performance.
By comparison, active funds are managed by a fund manager who actively makes decisions on the companies in which the fund invests.
Active managers believe choosing companies should boost the potential for returns higher than those achieved by simply mimicking a particular index.
Martin Bamford, managing director of Informed Choice, said: “There’s a big shift towards passive investing strategies, with the Vanguard LifeStrategy range leading this charge.
“It suggests advisers are focusing more on financial planning and behavioural coaching, allowing investment strategies to run on auto-pilot in the background.”
Mr Bamford said his “only concern” with a passive approach was that because markets had been inflated by a prolonged period of low-interest rates and central bank asset purchasing, the markets were in “untested territory”.
Alan Chan, director of IFS Wealth and Pensions, said: “The Vanguard LifeStrategy 40 per cent Equity fund is a popular choice as it is a low cost option and generally fits well within a portfolio or can be used as a single fund solution too.
“Passive funds can be a great option for investors particularly as many active funds fail to beat their benchmark.”
But Mr Chan also thought there were markets where active funds could outperform their benchmark and had done so with “flying colours” over long periods, although he thought this took time to research and required regular monitoring.
He added: “Passive funds are simple and almost ‘set and forget’ options.”
The latest sales figures also showed the global sector topped the chart for adviser sales in August, with ‘mixed investment 40-85 per cent’ and ‘volatility managed’ following closely behind.
Global Equity Income and Global Bonds also made the top 10 by sector, while mixed investment appeared three times in the most bought funds list of the platform.
|Top 10 adviser sales by sector|
|2||Mixed Investment 40-85%|
|4||£ Strategic Bond|
|5||Mixed Investment 20-60%|
|6||Global Equity Income|
|7||Mixed Investment 0-35%|
|10||£ Corporate Bond|
Paul Richards, head of sales at FundsNetwork, said: “August was a particularly volatile month for investors, with the FTSE100 suffering some of its biggest losses in almost a year.
“Against this backdrop, advisers continue to diversify their regional exposure in order to mitigate the challenges posed by political and economic uncertainty.”
Mr Bamford agreed. He said: “A move towards a more global investment strategy makes sense in light of continued Brexit uncertainty.
“Investors want to diversify away from UK markets, in case a no-deal Brexit causes the UK stockmarket to tank.”