August's 10 most-bought funds
Income continues to drive fund purchases, with CF Woodford Equity Income attracting strong inflows in August, while the success of Asian markets is luring buyers back into the region, according to data from our sister website Interactive Investor.
Of the top 10 most-bought funds on our sister webiste Interactive Investor during August, five were income-oriented; star manager Neil Woodford's new flagship fund, CF Woodford Equity Income, was the most bought fund overall.
Despite only being launched in June, CF Woodford Equity Income has attracted nearly £2.7 billion in assets. It is also the best-performing fund in its sector, IMA UK equity income, over three and one months, returning 3.5% and 5.8% over the respective time periods.
Woodford's former fund Invesco Perpetual High Income also attracted strong inflows, moving up from eighth place in July to become the fourth most-bought fund overall in August.
Unicorn UK Income also featured, dropping one place to sixth most-bought fund.
This is despite a run of poor performance since the death of the fund's manager John McClure in June that has seen Unicorn UK Income return just 0.21% year to date, compared to 3.2% from the UK equity income sector.
Schroder Income Maximiser made its debut appearance in August, squeaking in as tenth most-bought fund.
Managed by Thomas See since 2009, the nine-year-old fund has a mixed performance record, ranking in the top quartile of the IMA UK equity sector over three years but bottom quartile over five.
Over the past year the fund has underperformed the sector by nearly 2% with a return of 8.2%; however, its sector-beating 7% yield has no doubt helped it to attract new investors.
The strong performance of Asian markets over the past six months also caught the eye of investors in August: Newton Asian Income and First State Asia Pacific Leaders both made the top 10.
Newton Asian Income is a regular on the list, last featuring (in second place) in June. In August it was the sixth most-bought fund, slightly behind fellow Rated Fund Axa Framlington Biotech which jumped four places from ninth most bought fund in July to fifth in August.
However, this is the first appearance since December 2013 for First State Asia Pacific Leaders, which was the second most-bought fund overall. The £7.7 billion behemoth is a standout performer, returning nearly 350% over 10 years compared to 218% from its sector, IMA Asia Pacific excluding Japan.
Year to date the fund has returned 16.5% compared to a sector average of 11%, while Newton Asian Income has returned 12.7% as Asian markets continue to strongly outperform developed markets this year.
While income dominated fund buyers' choices in August, growth funds also made some headway, with Liontrust Special Situations making its first appearance within the top 10 for more than a year, ranking as the third most-bought fund overall.
Managed by highly experienced duo Anthony Cross and Julian Fosh, Liontrust Special Situations was dogged by poor performance in 2013 as its focus on large, high-quality growth companies served it poorly in last year's cheap value rally.
This year Cross and Fosh have managed to turn things around, with the fund returning 3.1% since January. This places it in the second quartile of the UK all companies sector, which has returned an average of 1.84% year to date.
Marlborough UK Micro Cap Growth also returned to the top 10 in August after one month's absence, ranking as the ninth most-bought fund overall. Managed by small-cap expert Giles Hargreave, it is a top quartile performer over one, three and five years, while year to date the fund has returned 6.6% compared to just 0.04% from the IMA UK smaller companies sector.
HSBC's FTSE 250 Index tracker fund also re-entered the top 10 after two months out as the eighth most-bought fund in August.
According to Investment Management Association statistics, tracker funds are slowly gaining more ground with UK investors: passive vehicles registered their highest sales ever in July at £513 million.
A number of trackers are poised to enter Interactive Investor's top 10, including Vanguard's LifeStrategy 80% Equities tracker, Fidelity Index UK and HSBC's FTSE All Share Index, which are currently residing in 14th, 15th and 17th place respectively.
This article was written for our sister website Money Observer
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Also known as index funds, tracker funds replicate the performance of a stockmarket index (such as the FTSE All Share Index) so they go up when the index goes up and down when it goes down. They can never return more than the index they track, but nor will they lose more than the index. Also, with no fund manager or expansive research and analysis to pay, tracker funds benefit from having lower charges than actively managed funds, with no initial charge and an annual charge of 0.5%.
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
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).