Market News

What Funds are Investors Buying and Selling in 2016?

November 23, 2016

What have you been buying and selling this year? The most popular fund of 2016 so far is the Bronze Rated Fundsmith Equity, recording £2.7 billion inflows year to date according to the latest figures from Morningstar Direct.

Investors also poured cash into the Bronze Rated Invesco Perpetual Global Targeted Returns fund to the tune of £2.4 billion, making it the second most popular fund of the year.

And have investors’ purchases paid off? Fundsmith Equity has delivered on performance; the fund gains 23.2% year to date and it has 20% three year and five year annualised returns.

From a performance perspective since its launch the fund has been in a sweet spot, according to Morningstar senior fund analyst Muna Abu-Habsa.

“The fund’s manager Terry Smith is a well-known personality, having headed up a number of FTSE companies, and he is an original thinker, often demonstrating his willingness to bet against the crowd,” said Abu-Habsa.

Analysts believe the fund remains an attractive choice for investors seeking global equity exposure, but caution investors should note that the fund has a distinct large-cap bias.

Multi-Strategy Proves Popular

Fund flows continue to be positive in multi-strategy funds in 2016, making it the most popular fund sector year with £7.6 billion inflows.

In April alone the sector recorded £1.1 billion inflows – the second highest figure since £ August last year during the China stock market collapse, when investors poured in £1.4 billion. Multi-asset and fund-of-funds strategies often do well in times of market stress as investors seek to outsource asset allocation decisions to the professionals.

Within that category Invesco Perpetual Global Targeted Returns gained the largest inflows of £2.4 billion inflows year to date.

Randal Goldsmith, senior fund manager research analyst said the mandate of the fund is free of benchmark constraints and can make use of the full range of liquid assets. Goldsmith believes that this fund’s management team have the necessary skills and back-up at the fund house to navigate this mandate well.

Aviva Investors Multi-Strategy Targeted Return fund also enjoyed £1.7 billion inflows year to date, making it the sixth most popular fund of the year. The fund currently has a Neutral Rating by Morningstar analysts.

What Have Investors Been Selling?

The least popular fund of 2016 is the Silver Rated M&G Optimal Income fund with £3.3 billion outflows year to date. However, the fund has seen fewer outflows in recent months than in the preceding year. In October this year the fund recorded £90 million outflows while October 2015 saw £742 million outflows.

Despite of outflows, Ashis Dash, associate director of fixed income strategies manager research at Morningstar, remains confident in the fund’s experienced manager Richard Woolnough.

“Woolnough’s ability to pick turning points in markets has been a key driver of the fund’s long-term performance,” Dash said.

Property Funds Flows Impacted by Brexit

There has been a lot of hot money flowing in and out of the property sector over the last six months following the Brexit vote. Six fund houses temporarily suspended trading of their open-ended property funds, due to liquidity concerns. The suspension clearly affected investors’ confidence in some of these funds, as Aberdeen UK Property has seen £2.9 billion outflows year to date, the second least popular fund in 2016.

However, Henderson UK Property was the third on the most popular fund list with £2.3 billion inflows at the same period of time despite weaker performance – 5.7% losses year to date. Investors may be attracted to the 3.4% 12 months yield, which provided an attractive source of income in a low-interest rate world.

Ahead of a number of European elections in 2017, investors are also selling European equity funds. European ex-UK large-cap equity sector recorded £1.6 billion outflows year to date. Within the sector the Bronze Rated Standard Life Investments European Equity Income fund suffered £1.6 billion outflows year to date despite positive performance of 9% returns year to date.

Source: Morningstar. Karen Kwok | 23/11/2016

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