Which were the most popular funds with our Bestinvest clients in November?

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 November.

“November was a month where the U.S. elections loomed large in investor minds and also a month of two halves. In the early part of the month, ahead of polling day, markets were quite jittery about both a potential for a ‘shock’ win by Donald Trump but also fears of a Democratic clean-sweep across the Senate, House of Representatives and the Presidency. Amongst the Bestinvest client base this perhaps explains the appearance of ETFS Physical Gold, a “risk-off” asset, and Invesco Perpetual Global Targeted Returns, an absolute return fund, into the top ten most popular funds this month.”

“In the aftermath of the result, equity markets moved on quickly with the evaporation of pent up anxiety around potential drug pricing controls from a Clinton administration that had weighted on healthcare stocks and as many investors have quickly got quite bullish on Trump’s plans to crank up growth through a heady cocktail of big tax cuts, de-regulation and a massive infrastructure investment programme. One of the most popular funds this month with our clients has been HSBC American Index, a low cost U.S. index tracker.”

“But as investors have mulled the ramifications of a Trump policy agenda, this has seen a sharp uptick in inflation expectations that has seen bond prices slide and yields rise. Unsurprisingly then, not a single fixed income fund made it into our top ten most popular funds during November.”

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

“The most popular fund with our clients yet again was the Fundsmith Equity fund. Managed by the forthright City big gun and prominent Brexiteer Terry Smith, he has an invest-and-hold strategy focused on quality growth stocks. 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%.

“Surging up in our rankings is the Stewart Asia Pacific Leaders fund. While emerging market equities and Asian markets rebounded strongly over the summer after a shaky start to the year, there is a great deal of uncertainty around outlook for the region following the U.S. elections as Donald Trump has previously advocated high tariffs on Chinese goods and vowed to pull the U.S. out of the Trans-Pacific Partnership trade deal with Asian nations. This fund has long been managed with a risk-aware style and is notably lowly exposed too China. It continues to have the highest weighting to India (28.4%), where the Government implemented a surprise currency reform this month, aimed at taking counterfeit cash out of circulation.

“The Tilney Bestinvest Growth fell one spot to be the third 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.

“Dropping one place further in our rankings to be fourth 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 cyclical 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.

“In fifth place is the HSBC American Index fund - 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%.

“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.

“First time making the list in 2016 is Invesco Perpetual Global Targeted Returns. The reappearance of an absolute return strategy on the most popular list is not surprising given the recent political upheaval across the globe and the unknown impact it may have on the markets. The fund aims to achieve a positive return in all market conditions as it uses hedging strategies, therefore understandable why clients have begun to look at including an absolute return strategy within their portfolio.

“Another first appearance in our most popular list is ETFS Physical Gold, an exchange traded commodity. The fund offers investors a way to access the gold market by providing a return equivalent to the movements in the gold spot price (less the applicable management fee) and is backed by physical allocated gold held in a secure vault. Gold is used within portfolios as a way of diversifying risk as its value tends not to move in line with other assets.

“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 AstraZenica and GlaxoSmithKline, and consumer goods companies Reckitt Benckiser and Unilever.

“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 newly appointed co-manager Mark Nichols who joined 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.”

-ENDS-

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 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. The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.

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. Funds which invest in specific sectors may carry more risk than those spread across a number of different sectors. In particular, gold, technology and other focused funds can suffer as the underlying stocks can be more volatile and less liquid.