Where did our clients invest in May?

Jason Hollands, Managing Director, looks at which investment funds proved most popular with Bestinvest clients in May.

Jason Hollands Jason Hollands
19 June 2017

In May, funds primarily focused on equities once again proved most popular with Bestinvest clients. The top 10 continued to be dominated by funds managed by seasoned active managers. Interestingly, Neil Woodford’s new fund, Woodford Income Focus – which launched in March and catapulted into our top 10 last month – dropped out of the top rankings this month. Overall clients continue to favour his existing Woodford Equity Income fund, which remained in the top five.

1.     Fundsmith Equity

Fundsmith Equity has remained at the top of the list for the past twelve months. Terry Smith has an invest-and-hold strategy focused on a concentrated portfolio of 30 quality growth stocks from across developed markets. He sums this approach up as “buy shares in good companies; don’t overpay; do nothing.” With one of the fund’s top holdings, US medical equipment firm C.R. Bard, being bid for, Smith has been building new positions that he will reveal when complete. The fund has a high weighting to consumer staples (31.7%), healthcare (29.1%) and technology (23.7%).

2.     Tilney Bestinvest Growth Portfolio

The Tilney Bestinvest Growth Portfolio was the second most popular fund among our clients. It is a ready-made portfolio for investors with a long investment time horizon. It invests into a portfolio of funds and ETFs selected by our research team, which include the likes of JO Hambro UK Opportunities, Liontrust Special Situations, Majedie UK Equity, Vanguard S&P 500 ETF and Artemis European Opportunities. 57% of the portfolio is invested in equities, with the remainder in absolute return funds, bonds, commercial property and gold.

3.     Threadneedle UK Equity Income

The Threadneedle UK Equity Income fund is another popular choice for UK equity exposure. Manager Richard Colwell has a pragmatic approach, focused on total return rather than yield per se. The fund is currently very underweight financials and overweight industrials compared to its FTSE All-Share benchmark. Companies within its top-10 holdings include healthcare multinationals GlaxoSmithKline and AstraZeneca and consumer goods companies Unilever and Imperial Brands.

4.     Tilney Bestinvest Aggressive Growth Portfolio

The Tilney Bestinvest Aggressive Growth Portfolio takes a more adventurous investment approach than the Growth portfolio, with a larger exposure to shares in smaller companies and overseas companies. It is also designed for investors with a high tolerance for risk and a long investment time horizon.

5.     Woodford Equity Income

Neil Woodford’s eponymous Woodford Equity Income fund has been drifting in and out of favour with our clients of late. His flagship fund is nestled in the middle of our most popular funds. Woodford has adopted a more bullish stance to companies exposed to the UK domestic economy recently, arguing that people are “too downbeat on the UK,” prompting a pre-election investment spree in housebuilders, construction and property companies. His optimism remains undaunted by June’s election result, which resulted in a hung parliament, arguing if anything it may be supportive if it results in a more stimulative fiscal policy and the potential for a softer Brexit.

6.     Stewart Investors Asia Pacific Leaders

One fund that continues to be popular within the emerging market and Asia space and continues to draw support from clients is Stewart Investors Asia Pacific Leaders, a longstanding top-rated fund. The fund, managed by David Gait, focuses primarily on investing in large companies with sustainable cash flows and robust balance sheets. Its highest weighting remains India (32.4%) followed by Taiwan (18%) but it has negligible exposure to China where concerns persist about the growth of debt.

7.     Threadneedle European Select

The Threadneedle European Select fund is consistently in our top 10 list. The fund retains a bias to the consumer goods, healthcare and consumer services sectors. The fund aims to seek out companies with strong brands that are less sensitive to price-based competition and as such it invests heavily in firms such as the world’s largest brewer Anheuser-Busch InBev and beverage company Pernod Ricard. It also holds large positions in consumer goods companies L’Oreal and Unilever.

8.     Jupiter India

The Jupiter India fund bursts into this list for the first time this year, coinciding with the third anniversary of the election of Prime Minister Narendra Modi’s reformist, BJP-led Government. The fund is managed by Avinash Vazirani, who has over twenty years of experience investing in Indian equities. While he is based in London, he visits India several times a year. Vazirani adopts a growth at reasonable price (GARP) style of investing, where he targets companies that he believes have strong growth prospects but have often been over-looked by the market. The fund has its biggest weighting in consumer goods and financials.

9.     Liontrust Special Situations

Managed by Julian Fosh and Anthony Cross, the Liontrust Special Situations fund has long held a highly coveted five-star rating from our research team and has managed to achieve both significant and consistent outperformance over the long term, but with less volatility than the UK market. The fund follows a well-articulated process, called the Economic Advantage approach, which looks for companies able to sustain a higher-than-average level of profitability for longer than expected. The companies the fund invests in have distinct characteristics, like ownership of intellectual property, strong distribution channels or significant recurring revenue streams whether they are large, medium-sized or smaller companies.

10. Lindsell Train Global Equity

The Lindsell Train Global Equity fund recently celebrated its fifth birthday. The fund, run by experienced management duo Michael Lindsell and Nick Train, has a strategy from a concentrated portfolio of equities deemed to be durable, cash-generative business franchises which are held for the long term. The biggest holdings in the fund include the likes of Nintendo, Heineken and Diageo. The managers note that while such holdings are often deemed to be ‘boring,’ they highlight that they are durable – over the long term, ‘boring’ wins out.

Shares update

While Bestinvest clients predominately choose funds, they can also purchase shares and investment trusts through the service. Lloyds Banking Group continued to be the most popular stock for the second month running. In May it was announced that the Government was to sell off its last remaining shares in the bank, eight years after pumping £20 billion into the company to prevent the bank’s collapse.

Petrofac had a turbulent month in May as its COO was suspended amid a corruption probe with the Serious Fraud Office.

Important information:

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This article does not constitute advice. If you are in doubt as to the suitability of an investment please contact one of our advisers. Past performance is not a guide to future performance.

Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. Smaller companies shares can be more volatile and less liquid than larger company shares, so smaller companies funds can carry more risk.

Underlying investments in emerging markets are generally less well-regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could both increase or decrease. These investments therefore carry more risk.