In Focus: Tax Year End  

Investors 'keeping faith' with underperforming managers

Investors 'keeping faith' with underperforming managers
 

Investors are “keeping the faith” with big fund managers despite weaker performances in recent months, according to AJ Bell.

Fundsmith Equity and Baillie Gifford’s Scottish Mortgage Investment Trust have been among the most popular investments with Isa savers in 2022 so far.

Scottish Mortgage’s share price has crashed 34 per cent in the year-to-date, sitting at around £8.50 a share, down from a peak of more than £15 in November 2021.

Terry Smith’s Fundsmith Equity has also stuttered this year, seeing its return drop to -13.2 per cent in the year to date to February 28.

According to its website, January this year was the worst month on record for the fund since its launch in November 2010, which saw a -9.5 per cent return.

The second most popular investment trust among Isa savers was the Scottish Investment Trust, which recently saw shareholders vote through plans to merge with JP Morgan’s Global Growth & Income Trust.

The trust saw a 23.77 per cent return for the year to March 4, compared to MSCI’s World index which saw returns of 10.74 per cent in the year to February 28.

Most popular funds, trusts and shares in AJ Bell Youinvest Isas

Shares

Funds

Investment Trusts

Glaxosmithkline

Fundsmith Equity

Scottish Mortgage IT

Lloyds

Fidelity Index World

Scottish IT

Rolls Royce

Fidelity Global Special Situations

Smithson IT

Vodafone

Baillie Gifford American

L&G Global Tech IT

BP

Baillie Gifford Positive Change

F&C IT

Unilever

Liontrust Sustainable Future Global Growth

Monks IT

Tesla

Standard Life Global Smaller Companies

City of London IT

AJ Bell

Jupiter UK Special Situations

Impax Environmental Markets IT

International Consolidated Airlines

Rathbone Global Opportunities

Blackrock World Mining IT

National Grid

LF Blue Whale Growth

Edinburgh Worldwide IT

Source: AJ Bell Youinvest ISA most bought investments 01/01/22 - 28/02/22

Laith Khalaf, head of investment analysis at AJ Bell, said Isa investors are keeping the faith despite these weaker performances.

“All active approaches will go through periods of underperformance, and so investors are absolutely right to look through the short term noise, particularly in light of the glittering returns these two funds have delivered in the last decade,” he said.

ESG funds also appear to be making more inroads than last year, he added, with three funds and trusts hitting the top ten list compared to just one over the same period in 2021. 

“This year Baillie Gifford Positive Change, Liontrust Sustainable Future Global Growth and Impax Environmental Markets all make the top ten, while just the Baillie Gifford fund made the leaderboard this time last year,” he said.

Growth investing remains popular with DIY Isa investors, Khalaf added, with Baillie Gifford continuing to capture flows and Blue Whale Growth joining the top ten.

Looking ahead, he added the April 5 deadline for the tax year acts as a “perennial catalyst” for Isa investors to make most of their allowance, and the tax rises coming in April makes it more of a priority for investors to shelter their savings from tax wherever possible.

“Those who are worried about inflation eroding cash returns, but also wary of the ups and downs of the stock market, might consider that they don’t need to invest their ISA as a lump sum,” he said. 

“They can park it as cash and drip feed it into the stock market gradually, making for a smoother ride.”

sally.hickey@ft.com