Jason Hollands, Managing Director at Tilney Bestinvest, comments on the funds that proved most popular with clients using Tilney Bestinvest’s Online Investment Service in January.
1. CF Woodford Equity Income
Star fund manager Neil Woodford’s eponymous Woodford Equity Income fund has perpetually featured on our list of most popular funds since its launch in 2014, and is now back to the top of the leader board. A tough start to the year in the markets means January was also one of the more difficult months the fund has faced. The largest detractors from performance came from the stocks in the US biotech sector, with Prothena and Alkermes losing out heavily over the month. But despite this, the fund continues to tower above most of the competition over both the last year and since launch.
2. Threadneedle European Select
Europe is our preferred equity market this year, with the potential for even more financial stimulus to be added by the European Central Bank. The Threadneedle European Select fund has long held a five-star rating from our research team so is a regular fixture in the top ten funds. Manager Dave Dudding is very positive on prospects for the European sector, and thinks that domestic European earnings will continue to contribute strongly to overall corporate profitability. One area he remains wary of is China, thinking that far-Eastern turmoil could impact European exporters and global growth, but Dudding’s ability as an excellent stock picker with a focus on quality companies should see investors through any increased volatility.
3. Threadneedle UK Equity Income
As predicted by fund manager Richard Cowell, the UK equities environment continued to be just as frustrating in January 2016 as it has been since 2014, yet the Threadneedle UK Equity fund outperformed its Investment Association benchmark by 1.83% by the end of the month. The manager admits he will sometimes take a contrarian approach which requires investors to have a thick skin; one example is GlaxoSmithKline (GSK), which has recently faced calls for a break-up from some investors. However Colwell believes GSK is an “attractive income investment” with a “stable growth outlook” that has been underpinned by moves to increase the scale of its vaccine and consumer divisions.
4. Stewart Investors Asia Pacific Leaders
January was a difficult month for Asian funds, as another bout of turmoil unfolded in China’s stock markets, with new circuit-breaking mechanisms forcing Chinese exchanges to cease trading twice within a week. While the Stewart Investors Asia Pacific Leaders fund has not been immune from these conditions, it still outperformed its MSCI AC Asia Pac Ex Japan benchmark by 0.3% during the month. Notably the fund is seriously underweight China, with mainland Chinese companies representing just 1.3% of the fund. Instead, the team are much more upbeat on India, where the fund has 23.1% exposure.
5. Liontrust Special Situations
There should be no surprises to find this fund once again on our ‘Most Popular’ list. The Liontrust Special Situations fund has a strong record of performance in all market conditions; especially in periods of volatility (although it should be remembered that past performance is no guarantee of future performance). Co-managers Anthony Cross and Julian Fosh pursue an “Economic Advantage” approach that focuses on companies – whether large, small or medium-sized – with durable competitive advantages that enable them to sustain a higher than average level of profitability. These include owning intellectual property, strong distribution networks or recurring revenue streams. One such example is the fund’s biggest holding, AIM-listed EMIS Group, a leader in healthcare record-keeping software and services that is used by the NHS.
6. Standard Life Global Absolute Return Strategies (GARS)
This fund remains the dominant choice for investors looking for funds that target positive returns across different market conditions. The Standard Life “GARS” team predicted in December that 2016 would prove a challenging year for investors, and so far January has proven them right. They expect to see further divergence of monetary policy between the world’s Central banks, constrained global profit growth and political tensions throughout the world – all combining to create even more volatility as 2016 continues. They believe investors with more dynamic asset allocation strategies will come out of current turbulence most favourably.
7. HSBC American Index
Recent economic data coming out of the US has been mixed, to put it mildly, and the US market could struggle to make headway after a long bull market. When it comes to investing in the US, tracker funds have long been popular with clients, providing a low cost way of gaining exposure. This fund has an ongoing charges figure of just 0.08%.
8. AXA Framlington UK Select Opportunities
A Brexit-tinted fog is currently clouding the outlook for UK equities, with no one yet being able to authoritatively call which way the vote will swing. Opinion polls indicating a UK exit are being treated with high levels of suspicion, AXA Framlington putting this down to bad memories of polling issues in the run-up to the Scottish referendum and the 2015 general election. Trustworthy or not, these polls are clearly still a factor at play on both sterling and the euro and AXA Framlington sees the situation as set to drag out for some time. In this environment, investors might do well to put their faith in seasoned investors, such as veteran fund manager Nigel Thomas, who follow a very selective approach to picking stocks. For example, Thomas owns no mining stocks, is avoiding utilities, has had very little exposure to oil and gas and is seriously underweight banks. Instead, his top holdings include the likes of sports gaming giant Betfair, ITV, property website Rightmove, plastic packaging group RPC and Dixons Carphone.
9. Fundsmith Equity
Straight-talking manager Terry Smith promises a “no nonsense” approach to investing. He focuses on quality businesses that can sustain high returns and have advantages, such as loyal customer bases, that are difficult for their competitors to replicate. Smith recently jettisoned the fund’s holdings in Proctor & Gamble after becoming concerned by the US consumer giant’s pricing strategy. Tobacco companies Philip Morris and Imperial Tobacco contributed well in January, with detractors over the month including Intercontinental Hotels, Visa and Microsoft.
10.Henderson UK Property
The end of 2015 saw strong investor interest in the UK commercial real estate sector and the Henderson UK Property team remains positive on the outlook for 2016. Andrew Friend, Fund Director, sees long-term income returns being driven chiefly by location and as such the fund overall retains a South East bias. However, the team is also exploring options within the “alternatives” sector, and has just acquired land in Durham with planning consent to build a 109-apartment student accommodation complex to service the city’s sizeable student population.
At a glance: The most popular funds selected by clients using Tilney Bestinvest’s Online Investment Service in January 2016:
Find out more about how we rate funds here: /investment-research/our-research-approach