Although the popularity of a fund or trust is not an indicator of success, it is always interesting to see what others are buying as the Isa season draws to a close.
Inflation continues to be the primary concern for investors as it eats away at savings pots and investors have been forced to seek out funds and trusts that make their money grow.
This means that investors have sought to add dividend-paying investments to their portfolio to provide reliable income and capital growth.
Ahead of the Isa deadline, markets have been rocked by the fallout from the Silicon Valley Bank collapse and issues with Credit Suisse – this could mean a last-minute switch to consumer protection funds and trusts. heritage.
But before that, they also bolstered their portfolios with passive trackers as active funds failed
We ask three of the biggest platforms – AJ Bell, Fidelity and Interactive Investor – where investors have put their money so far this year.
Best-selling funds and trusts: We take a look at where investors are putting their money ahead of Isa maturity
Caution drives investors to opt for liabilities
Conventional wisdom holds that active managers tend to navigate the markets better than the passive strategies that have just followed them, but 2022 and 2023 have shown their limits.
Morningstar’s 2023 European Asset/Passive Barometer reveals that only 29% of active equity managers were able to outperform their passive peers in 2022.
Vanguard funds continue to dominate the top picks among investors and make up seven of the top 10 most popular funds among ii clients.
“Fund investors continue to shift away from actively managed strategies, with passive strategies, and most notably – Vanguard funds, dominating the top picks for ii clients so far this year. In fact, Terry Smith’s Fundsmith Equity is the only active management flagship in the top 10,” says Kyle Caldwell, Collectives Specialist at Interactive Investor.
“During such a turbulent period for the markets last year, when active funds had a tough year and many failed to beat the index, it’s no surprise that fund investors preferred passive management to active management.
“Time will tell if that remains the case or starts to change if we see more momentum in the markets later in the year.”
One of the main attractions of passive funds is that they are simple and much cheaper than active funds.
Investors can take comfort in knowing that they will get the overall performance of the index they have chosen to track. This means that while they will not outperform the benchmark, they are also unlikely to underperform.
With interest rates rising and market prospects still uncertain, passive trackers are seen as a less risky option.
Tracking funds from Fidelity and Legal & General is a popular choice among Fidelity clients, although they are increasingly cautious in today’s environment.
Tom Stevenson, Chief Investment Officer for Personal Investing at Fidelity, said: “The Fidelity Cash Fund is Sipp investors’ favorite fund and is also in the top 10 for Isa. The Royal London Short Term Money Market Fund is also popular this year. X
“Cash finally offers a viable alternative to riskier equity and bond investments and for many investors the safety of cash is attractive even if returns remain negative in inflation-adjusted terms.”
Investing in the UK is in demand
Elsewhere, UK funds are in particular demand.
AJ Bell clients opted for iShares Core FTSE 100 UCITS ETF, given the strong performance of the index in 2023 compared to other global indices.
Similarly, the Vanguard FTSE UK Equity Income Index has been a popular choice for ii clients so far this year. The fund invests in the constituents of the FTSE UK Equity Income Index, which consists of stocks which are expected to pay generally above average dividends.
It has a current dividend yield of 4.9%.
|Fund Founder||Scottish Mortgage|
|Global Loyalty Index||City of London|
|Vanguard S&P 500 UCITS ETF||JP Morgan Global Growth & Income|
|Vanguard LifeAll Equity Strategy||F&C Investment Trust|
|iShares Core FTSE100 UCITS ETF||Personal Property Trust|
Caldwell adds, “As always, diversification is always key. For many investors, having a mix of active and passive funds makes sense.
“One way to structure a portfolio is the core and satellite strategy.
“The core of the portfolio should be made up of investments that offer few surprises – such as global or developed market funds – managed actively or passively.
“Satellite holdings are spicier – high-risk funds hoping to generate higher growth. Ultimately, with any investment – there are no guarantees. It’s a long-term game, and much of your choices as an investor will depend on your risk appetite.
Portfolio mainstay Fundsmith Equity remains popular
Passive trackers may have become the strategy of choice this year, but investors are still opting for household names despite a period of underperformance.
Fundsmith Equity, managed by Terry Smith, has long been one of the most popular investment funds and has shown consistent staying power.
On all three platforms, it remains among the top five funds selected by investors, despite a few difficult months.
In 2022, the fund recorded a return of -13.8%, behind the benchmark MSCI World which recorded a total loss of -7.8%.
The focus on “high quality” companies that can sustain high yield helped the fund deliver a total return of 1.5% in February, outperforming the benchmark by 1.7 percentage points.
|Fund Founder||Scottish Mortgage|
|Vanguard LifeStrategy 80% equity||City of London|
|Vanguard LifeAll Equity Strategy||F&C Investment Trust|
|Vanguard US Equity Index US Equity Index||Greencoat UK Wind|
|Vanguard LifeStrategy 60% Equity||Blackrock World Mining|
|Vanguard Global All Cap Index||Rit Capital Partners|
|Vanguard Developed World Ex UK Equity||The Renewable Energy Infrastructure Group|
|HSBC FTSE World Index||Murray International Trust|
|UK Loyalty Index||Alliance Trust|
|Vanguard shares FTSE UK||Merchant Trust|
Alena Kosava, head of investment research at AJ Bell, says: “Quality companies owned by companies like Fundsmith have seen their valuation multiples stretch over the years, but these have contracted significantly until now. ‘in 2022.
“In an environment where global growth is slowing and there is a need to increase the visibility and reliability of corporate earnings, quality stocks may not be a bad place to ride out continued uncertainty and heightened volatility until in 2023.”
“For investors, while it’s incredibly difficult to time the markets, over the long term, exposure to global companies has paid off over time and it’s important to keep that in mind, especially when the markets face tough times.”
The Scottish mortgage is still popular
Scottish Mortgage has remained a staple in the portfolios of many investors, topping the list of trusts from AJ Bell and II.
The investment trust has long been popular among investors seeking exposure to growth sectors, but the technology rout that characterized much of 2022 has led to a period of underperformance for the trust.
It generated a total net asset value return of -11.7% over the past year, lagging the global AIC sector average of -2.8%. Its share price also suffered, returning -23.5% while the sector average returned -6.9%.
Kosava adds: “While we are not out of the woods yet and growth stock valuations may fall further, investors may feel that much of the bad news is already priced in.”
|Fidelity Global Index Fund|
|UK Legal and General Index Trust Fund|
|Fidelity U.S. Index Fund|
|Fidelity UK Index Fund|
|Fidelity Treasury Fund|
|Fidelity FIF Global Special Situations Fund|
|Fidelity Fund – Global Technology Fund|
|Fundsmith Equity Fund|
|Dodge & Cox Worldwide Funds plc – Global Equity Fund|
|Fidelity FIF Global Dividend Fund|
Investors are looking for income
There are good reasons to consider adding dividend-paying investments to your portfolio to provide income and growth.
Investment trusts have been a good source of income for many investors – the list of “dividend heroes” now includes 18 trusts, eight of which have collected dividends for at least 50 years.
City of London Investment Trust, managed by Job Curtis, has increased its dividends for 56 consecutive years, meaning it remains a popular choice for investors seeking income.
> What is a dividend and how is it taxed? What do you want to know
F&C Investment Trust is another trust investors have flocked to, despite a turbulent 2022 in which both share price and net asset value lost ground.
In January, the net asset value return of the trust was 4.3% and shareholder return 5.8%, compared to the FTSE All World Index return of 4.6%.
Like City of London, it is another dividend hero, raising its dividend for 52 consecutive years.
Greencoat UK Wind makes the ii list largely due to its attractive yield of 5.6% currently.
Caldwell adds: “Another notable trust in the top 10 for 2023 so far is Merchants Trust, which also has a higher yield than its peers, at 4.6%. It aims to deliver a level of revenue and growth above-average income, as well as long-term capital growth, by investing primarily in large, high-yielding UK companies.
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