February's 10 most-bought funds
After a brief revival for emerging markets (EM) in January, when three EM funds were among the ten most-bought, February's most-popular funds were generally UK-focused.
Paul Marriage's Cazenove UK Smaller Companies Fund was knocked off the list after five consecutive months at the top as it closed to new purchases on 22 January, making way for January's second-placed fund, Axa Framlington Biotech to take the top spot.
Managed by Linden Thompson, the US biotechnology-focused fund is unsurprisingly popular as it delivered a return of 61.96% over the last year and 164.02% over the last three.
Although the Axa fund does not have much in common with the other top purchases, there are trends to be spotted in the rest of the list, most of which continue from January. Income was a focus for investors, while UK smaller companies remained popular.
In making these choices, Interactive Investor users followed general investing trends reported by the research team at stockbroker Numis Securities, although they were slower to exit emerging markets than general investors.
"There were strong flows into fund investing in the UK and Europe whereas Asia excluding Japan and emerging markets suffered outflows following relatively weak performance in these regions since May 2013," Charles Cade and Ewan Lovett-Taylor commented in their report on fund trades in January.
"Perhaps the most notable sub-sector is UK smaller company funds which have benefited from net inflows every month since August 2012."
According to Numis, January saw the highest number of monthly inflows into smaller company funds on record, £241 million, and the Interactive Investor data shows that these funds remained popular in February, perhaps because they have been trading at a discount for some time due to long-term outflows.
Three smaller-company funds made it into the top ten, with the Investec UK Smaller Companies fund, the River and Mercantile UK Equity Smaller Companies fund, and the CF Miton UK Smaller Companies fund taking third, fourth and fifth place respectively.
All three outperformed the UK Smaller Companies sector, which delivered returns of 32.67% over one year and 55.97% over three. Gervais Williams's CF Miton fund provided the best return over a year, at 55.79%, while the River and Mercantile fund, managed by Daniel Hanbury, delivered 112.13% over three years.
Ken Hsia"s Investec fund had the least impressive returns, at 47.16% over one year and 79.99% over three, but still outperformed the sector. The fund invests in small-cap UK companies including Quindell, Optimal Payments and Utilitywise.
The other priority for investors in February was income, and this too was UK-focused. Of five income funds appearing in the ten most-bought, only the Artemis Global Income fund had a non-UK focus.
Jacob de Tusch-Lec's fund, which delivered returns of 14.89% over one year and 47.94% over three, invests chiefly in European and US equities. The eighth most-bought fund"s top holdings include Portuguese postal service CTT Correios de Portugal, pharmaceuticals company Abbvie and investment bank Blackstone.
The other most-bought income funds were the Unicorn UK Income fund, the Rathbone Income fund, the JOHCM UK Equity fund, and the Invesco Perpetual Income fund.
They all beat the UK Equity Income sector"s returns of 16.99% over one year and 36.98% over three, and invested in large-cap UK companies, with GlaxoSmithKline, AstraZeneca and Royal Dutch Shell counting among the top holdings for several.
However, it is interesting to note that, despite the focus on income, the Invesco Perpetual High Income fund dropped out of the ten most-bought funds in February and the Invesco Perpetual Income fund appeared only at the end of the list. This suggests that investors may be beginning to show nerves over the imminent departure of star fund manager Neil Woodford in April.
One growth fund also made the list, the MFM Slater Growth fund, which took ninth place. Like the income funds, it outperformed its sector, UK All Companies, and focused on UK-listed companies including Hutchison China and Entertainment One.
This article was written for our sister website Money Observer
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.