Where did our clients invest in October 2016?
Jason Hollands, Managing Director at Bestinvest looks at the top ten funds that proved most popular with clients using the Bestinvest Online Investment Service in October.
The top choices were:
1. Fundsmith Equity
The most popular fund with our clients for the fifth month running was the Fundsmith Equity fund, managed by the forthright City big gun Terry Smith. Smith has an invest-and-hold strategy focused on quality growth stocks, and the fund is made up of 29 holdings, from across developed markets. He sums this up as: “Buy shares in good companies; don’t overpay; do nothing.” It currently has a focus on consumer staples, 36.2%, healthcare, 24.6%, and technology, 25.2%. He hit the headlines recently for ploughing £115 million more of his own cash into the fund, bringing his total holding to more than £200 million – a big vote of self-confidence.
2. Tilney Bestinvest Growth Portfolio
The Tilney Bestinvest Growth portfolio jumped up a place to be the second most popular fund and is designed for investors with a higher tolerance for risk and a long investment time horizon. It invests into a portfolio of funds selected by our research team. Around two-thirds of the portfolio is invested in equity funds, including exposure to smaller companies, emerging markets and Asia. The remainder of the portfolio is diversified across bond funds, commercial property and other areas to reduce stock market risk.
3. Woodford Equity Income
Knocked into third place for the first time in four months is the eponymous CF Woodford Equity Income fund, managed by Neil Woodford. His flagship fund generally focuses on resilient businesses that are less affected by the global economic cycle and are more in charge of their own destiny. Longstanding top holdings include healthcare multinationals AstraZeneca and GlaxoSmithKline, and he continues to invest very significantly in the tobacco industry with big positions in industry giants Imperial Brands and British American Tobacco.
4. Tilney Bestinvest Aggressive Growth Portfolio
In fourth place the Tilney Bestinvest Aggressive Growth Portfolio takes a more adventurous investment approach than the Growth portfolio, with a larger exposure to shares in small companies and overseas companies. It is also designed for investors with a high tolerance for risk and a long investment time horizon.
5. Stewart Asia Pacific Leaders
Emerging market equities and Asian markets rebounded strongly over the summer after a shaky start to the year so it was unsurprising to see Stewart Asia Pacific Leaders, a longstanding top-rated fund, appear in the list. Angus Tulloch handed over the management of the fund to David Gait in the summer, but the investment approach remains consistent and the team continues to have the highest weighting to India (24.8%), with Taiwan (19.3%) the next largest weighting.
6. 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, that 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. Top holdings include oil firms BP and Royal Dutch Shell, pharmaceutical companies AstraZeneca and GlaxoSmithKline, and consumer goods companies Reckitt Benckiser and Unilever.
7. Vanguard LifeStrategy 80% Equity
This is the first appearance for the Vanguard LifeStrategy 80% Equity Fund in our top 10 list for 2016. A fund that does exactly what it says on the tin by consisting of 80% equity securities and 20% fixed income securities. The underlying portfolio is wholly made up of Vanguard index tracker funds. Its highest allocation is within North American Equities, followed by UK Equities then Global Bonds.
8. Threadneedle European Select
The Threadneedle European Select fund retains its inclusion within our top-10 list at a time when manager Dave Dudding is positive on opportunities for his fund, despite volatility being generated by geopolitical uncertainty in Europe and beyond. Dudding has recently been joined by co-manager Mark Nichols who arrived from BMO Global Asset Management. The fund retains its bias to consumer goods, with healthcare and consumer services also areas of focus. Financials are a considerable underweight due to concerns over the European banking sector. The fund aims to seek out companies with strong brands that are less sensitive to price-based competition and as such the fund invests heavily in firms such as Unilever, the multinational consumer goods company, and the world’s largest brewer, Anheuser-Busch InBev.
9. HSBC American Index
The HSBC American Index fund is a tracker fund that follows the S&P 500 index, which is notoriously hard for active managers to beat. Over the last five years managers of US equity funds have struggled to keep up with a bull market in US shares lifted on a tide of cheap money. No wonder, then, that many investors have given up entirely on active funds for their US exposure, choosing low-cost trackers instead. This tracker fund has a very low ongoing charges figure of 0.08%. However, with one of the most acrimonious Presidential elections in recent history underway and the US Federal Reserve Bank contemplating future interest-rate hikes, the US market could face some volatile times ahead.
10. Threadneedle UK Equity Income
The Threadneedle UK Equity Income fund is another great choice for core UK equity exposure. Manager Richard Colwell is well regarded due to his experience and pragmatic approach, and his fund currently has a defensive skew that focuses on total return. It is currently very underweight financials and overweight industrials compared to its FTSE All-Share benchmark. Companies within its top ten holdings include Wm Morrison Supermarkets, BT Group and RSA Insurance Group.
The most popular funds selected by clients using the Bestinvest Online Investment Service in October 2016:
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 personal 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.
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.
Smaller companies shares can be more volatile and less liquid than larger company shares, so smaller companies funds can carry more risk.
Tracker funds track the performance of a financial index and as such their value can go down as well as up, much like shares, and you can get back less than you originally invested. Some are more complex so you should ensure you read the documentation provided to ensure you fully understand the risks.