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Where did our clients invest in June?

Jason Hollands, Managing Director at Bestinvest comments on the funds that proved most popular with clients using the Bestinvest Online Investment Service in June.

Over the month, our clients continued to demonstrate their preference for funds run by seasoned managers both in the lead up to and immediate aftermath of the UK’s historic decision to leave the European Union. For investors to place their money in such trusted hands may well prove to be a wise decision, as market turbulence is set to continue as the impact on the UK and European outlook unfolds, and because of other concerns hanging over the markets such as the direction of US monetary  policy and a weakening of the Chinese currency.

Equities and multi-asset funds with high equity weightings remain the predominant funds within our list of most-popular funds*, but we also see the return of the industry’s most dominant absolute return fund (Standard Life GARS) – perhaps to be expected as Investment Association figures show an overall trend of investors turning to cautious investment sectors. We also see the appearance of two of the UK’s biggest banks, Lloyds and Barclays, whose shares were both aggressively marked down in the wake of the vote but were bought heavily by clients hunting for what they believe are bargains.


The top choices were:

1. Fundsmith Equity

City maverick Terry Smith, manager of the Fundsmith Equity fund, was ardently on the side of the Leave campaign during the lead up to the referendum, having said a weaker sterling “would be rather good for us. Most of our companies are non-sterling earners”. He was certainly correct in his prediction, as his fund has been a top performer since the 24 June, having climbed almost 12% at the time of writing.

The fund invests in quality growth companies on a global basis, and currently has 62.4% exposure to US companies and 23% to the UK. Top contributions in May came from JM Smucker (the American food and beverage manufacturer and the fund’s top holding) and medical technology manufacturer CR Bard, while Intercontinental Hotels and Newcastle-based enterprise software company Sage made up some of the top detractors.

2. Stewart Investors Asia Pacific Leaders

The Stewart Asia Pacific Leaders fund has been another big winner over the last fortnight, having risen almost 14% since the referendum at the time of writing. Manager Angus Tulloch has guided the fund through incredibly volatile Asian markets and this month hands over the reins to David Gait, a seasoned investor in his own right, who has managed the Pacific Assets investment trust since 1997.

3. Lloyds Banking Group PLC

Banks were hit hard by the referendum result, with Lloyds’ shares falling to their lowest value since April 2013. However investors using our Online Investment Service clearly believe this presents an opportunity, with the reduction in price inspiring a surge of purchase orders that brings Lloyds into our list of most popular stocks, based on volume of sales, for the entire month.

4. Woodford Equity Income

As the most famous fund manager currently operating within the UK, many of Neil Woodford’s large fanbase would have keenly anticipated his comments in reaction to the Brexit vote. His public statements leading up to the referendum were very much designed to ease the collective mind of investors in his Woodford Equity Income fund, and his key message of calm has remained the same in the wake of the ‘out’ vote.  In a video blog posted to his website, Woodford explained that the vote “doesn’t really change anything fundamental. We’ve been cautious on the UK economy, and the global economy, for some time”. He has thrown doubt on the likelihood of a future UK recession, saying “I think we all got a little too negative about what the implications of leaving the EU would be on the economy in the medium and long term”. Investors will be happy to hear Woodford is confident that the prospects for the businesses the fund invests in remain unaltered, which includes tobacco companies like Imperial Brands, British American Tobacco and Reynolds American, as well as health care multinationals AstraZeneca and GlaxoSmithKline.

5. Liontrust Special Situations

Co-managers Anthony Cross and Julian Fosh are experienced hands when it comes to managing through volatility, and have zero exposure to consumer cyclicals such as retailers or construction firms, as their process focuses on businesses with resilient characteristics with the capacity to keep growing across the economic cycle and high barriers to competition. Their Liontrust Special Situations fund’s holdings include Diageo, the manufacturer behind globally popular alcoholic drinks such as Smirnoff vodka and Guinness stout, and EMIS Group, a smaller company holding, which provides software and IT to NHS health authorities and is therefore less sensitive to the ups and downs of the economy.

6. Legg Mason Japan Equity

Investors in the Legg Mason Japan Equity fund have a lot to thank hedge fund legend George Soros for. Manager Hideo Shiozumi revealed this month that in the early 1980s, he was on the verge of quitting the industry to set up a Japanese restaurant until Soros convinced him to pick stocks for his New York-based Quantum Fund. Over 30 years later and Shiozumi’s own Japan Equity fund has cemented itself as the top-performing Japan fund over multiple timeframes, and he has consistently stuck to what he describes as a “British brand of old-style stock picking”; focused on people, less worried about numbers, and suspicious of short-term trading.

The fund focuses specifically on growth companies of the so-called ‘New Japan’, which includes areas such as healthcare and information technology. Bestinvest clients benefit from a 0.05% unit rebate on the fund, which reduces the ongoing costs from 1.02% on the X share class to 0.97%.

7. AXA Framlington UK Select Opportunities

June sees the return of the AXA Framlington UK Select Opportunities fund to the most-popular list, another example of investors choosing experienced hands to guide them through volatility. Nigel Thomas has been managing in the UK All Companies sector f0r over 28 years, and his fund is heavily underweight financials and consumer goods. Top holdings include well-known consumer brands Paddy Power Betfair, ITV and Dixons Carphone.

8. Barclays PLC

The second bank to be propelled into our most-popular list by bargain hunting investors is Barclays, whose share price has (at the time of writing) tumbled to its lowest value since the 2008 financial crisis.

9. Tilney Bestinvest Growth Portfolio

The Tilney Bestinvest Growth portfolio is designed for investors with a higher tolerance for risk and a long investment time horizon. Around two-thirds of the portfolio is invested in equity funds, including exposure to smaller companies, emerging markets and Asia. The remainder of the fund is diversified across bonds, commercial property and other areas to reduce stock market risk.

10. Standard Life Global Absolute Return Strategies (GARS)

This fund remains the market leader amongst funds that target positive returns across different market conditions, though a number of rival funds have emerged. The Standard Life GARS team predicted in December of last year that 2016 would be a challenging year for investors, and the first half has largely proven them right. Their multi-asset investing team are currently looking at equities in Indonesia and Italy, two countries which have undertaken major reform programmes with tangible successes, as sources of positive returns to buffer any short term turbulence.

At a glance: The most popular funds selected by clients using the Bestinvest Online Investment Service in June 2016:

 

Fund name

Tilney Bestinvest rating

1.

Fundsmith Equity

2.

Stewart Investors Asia Pacific Leaders

 

3.

Lloyds Banking Group PLC

No rating

4.

CF Woodford Equity Income

 

5.

Liontrust Special Situations

 

6.

Legg Mason Japan Equity

7.

AXA Framlington UK Select Opportunities

8.

Barclays PLC

No rating

9.

Tilney Bestinvest Growth Portfolio

No rating

10.

Standard Life Global Absolute Return Strategies (GARS)

Find out more about how we rate funds here: /investment-research/our-research-approach

* The most popular funds selected by clients using Tilney Bestinvest’s Online Investment Service in June 2016

The value of your investment can go down as well as up, and you can get back less than you originally invested.

The Bestinvest Online Investment Service, including any account analysis and investment reports provided by our guidance services, is an online execution-only dealing service for investors who want to make their own investment decisions. It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice. Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

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© Tilney Bestinvest Group Ltd 2016.

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