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 November.
1. CF Woodford Equity Income Fund
“High profile manager Neil Woodford has been in the press for the wrong reasons in recent weeks, having suffered steep losses in US firm Northwest Biotherapeutics. Despite this, his large and devoted fan base are likely to keep their faith as the fund has enjoyed excellent performance since launch, and his strong long-term record in the UK Equity Income sector is reflected by his fourth place ranking in our latest Top 100 Fund Managers report."
2. Threadneedle European Select Fund
“The European Central Bank recently announced an extension to its Quantitative Easing stimulus programme though the markets were underwhelming having expected bolder measures than those delivered. Nevertheless, monetary policy remains very accommodative in Europe and this should be supportive to equities.
“The Threadneedle European Select fund has long held a coveted five-star rating and remains popular with Online Investment Service customers. The fund backs well-known companies with strong brands like cosmetics group L’Oreal and Anglo-Dutch consumer giant Unilever.”
3. Threadneedle UK Equity Income
“Richard Colwell has a pragmatic approach to the management of the Threadneedle UK Equity Income fund, with a focus on total return – i.e. not just achieving a market-beating dividend income – and is not wedded to a dogmatic value or growth investment style. The fund is relatively concentrated with 51 holdings and is currently overweight consumer services, industrials and healthcare and heavily underweight financials and oil and gas. Key holdings including Imperial Tobacco, Astrazeneca and WM Morrison Supermarkets. Colwell expects the recent spate of large mergers & acquisitions to continue and believes the fund is well positioned to benefit from this.”
4. AXA Framlington UK Select Opportunities
“This fund’s manager, Nigel Thomas, has been managing money in the UK All Companies space for over 28 years, making him one of the most experienced managers in the market. Naturally, the funds popularity means it now sits at a hefty £4.3 billion in size, but it continues to take high conviction views on stocks and sectors and has a large weighting to mid-cap companies.
“The fund currently favours industrial and consumer service companies and is underweight banks, oil and gas and has no exposure to mining stocks or utilities. Top holdings include ITV, sports betting exchange Betfair (which has agreed a merger with rival Paddy Power) and online property site Rightmove.”
5. Henderson UK Property
“The Henderson UK Property fund invests in high quality commercial properties with strong tenants on long leases with the goal of achieving a steady income from rents. 58% of the exposure is to London and the South East of England, with properties like 440 The Strand, the home of Coutts Bank, Windsor Office Park in Berkshire, and the headquarters of the London Fire Brigade, 169 Union Street. The fund has recently acquired student accommodation in Kingston, adding to similar assets in Exeter and Glasgow.
“Overall around 28% of the property is exposure to retail outlets, 28% office blocks and 16% industrial properties. The average unexpired lease on the portfolio is 11.1 years with vacancy rates of 2.3% which is well below the Investment Property Databank average vacancy rate of 9.5%. Investors considering this fund should note that, as physical properties are illiquid assets, the fund also holds considerable exposure to liquid assets, including cash and property-related shares, to meet potential outflows.”
6. AXA Framlington Biotech
“A brief spell away from our most popular funds list last month appears to have been a temporary phenomenon as once again this specialist fund returns to the top ten. The fund has a global mandate but is 87% exposed to US companies, reflecting America’s world leading position in biotechnology. Potential investors should also be aware that this is very concentrated fund, with 60 holdings overall but 28.3% of the fund invested in the three largest stocks. The fund has recently increased its position in Celgene Corp, which manufactures cancer drugs, to 9.7% of the fund following share price weakness caused by safety concerns reported in Phase III trials for its lead drug solthromycin. Other large holdings are Gilead Science Inc, which concentrates on producing antiviral drugs to treat sufferers of HIV, and Biogen which provides therapies of multiple sclerosis, non-Hodgkin’s lymphoma and rheumatoid arthritis. Investors should remember that investment in the biotech sector is very high risk.”
7. HSBC American Index
“This fund tracks the US market with very low ongoing charges of 0.08%.”
8. Fundsmith Equity
“Terry Smith is one of the most colourful and pugnacious characters in the City. A former stockbroking analyst, he achieved notoriety with the publication of Accounting for Growth, which in 1992 blew the whistle on creative accounting techniques. He then went on to become CEO of Collins Stewart, floating the company and acquiring rivals to create Tullet Prebon, a leading inter-dealer broker. In 2010 Smith launched Fundsmith as a foray into investment management.
"Smith’s approach is very much a long-term buy-and-hold philosophy, and he looks for companies with the ability to sustain high rates of return on capital, in cash. The fund is split between the US, the UK and Europe and offers investors exposure to giant consumer brands like Microsoft and Pepsico, who manufacture hugely popular fizzy drinks and snack foods like Pepsi, 7 Up and Walkers Crisps."
9. Stewart Investors Asia Pacific Leaders
“The announcement that veteran manager Angus Tulloch will hand over the reins of his flagship Asia Pacific Leaders fund in July 2016 was a major investment story in November. Tulloch has been a towering presence in Asian equity markets, and an example of how active managers can achieve consistent outperformance. We recently named him the number one fund manager in our Top 100 Fund Managers report for his career track record.
“The good news is that he will remain a member of the Stewart Investors team and his replacement, David Gait, has an excellent record as well. This should provide a comfortable transition for the fund.”
10. Old Mutual UK Smaller Companies
“Although this fund has a strong track record, we downgraded it to a two star “hold” in the summer. The team are now running very sizeable assets and we think there are advantages to managing more modestly sized funds when it comes to investing in smaller companies, as such funds have greater flexibility to invest lower down the company size spectrum. Two alternative funds worth considering that are rated by our research team are the AXA Framlington UK Smaller Companies fund and the Franklin UK Smaller Companies funds.”
At a glance: The most popular funds selected by clients using Tilney Bestinvest’s Online Investment Service in October 2015:
Find out more about how we rate funds here: /investment-research/our-research-approach