This year almost a third of January Isa investments have gone into UK equity funds, which invest in the shares of companies listed on the London Stock Exchange.
Income generators popular
UK equity income funds, which invest in dividend-paying firms, are top of the pops, having attracted more than 15% of inflows. Strategic bond funds – which invest in government and corporate bonds, and were out of favour last year – attracted almost 8% of Isa money.
Winners and losers
The big loser is the property fund sector. After some commercial property funds suspended trading following the Brexit vote, their popularity plummeted. The sector has fallen from 6th to 21st spot, having attracted less than 1% of Isa inflows. It’s a shame. The ‘gating’, although frustrating if you needed your money, stopped investors panicking and incurring big losses, and I believe these funds still have a place in a diversified portfolio.
Global emerging market funds remain unloved, having attracted a fraction over 1% of Isa investment. In contrast, Asia Pacific ex Japan funds have made a modest comeback, accounting for 4% of Isa sales.
Familiar fund faces
The top-selling funds are CF Woodford Equity Income*, followed by Fundsmith Equity*. Stewart Investors Asia Pacific Leaders* and Invesco Perpetual Monthly Income Plus regained the top 10 status they lost in 2016.
There are fewer medium and smaller companies funds among the top-sellers. Investors may be waiting out Brexit uncertainty by favouring larger, US dollar-earning businesses in the FTSE 100.
Despite having 12 months to make use of their annual Isa allowances, investors always seem to leave it to the last minute. March is by far the busiest month for Isas as people rush to meet the 5 April deadline.**
March could be especially busy, as Neil Woodford, one of the UK’s most successful fund managers, is launching an income fund at the end of the month. When he launched CF Woodford Equity Income in 2014, it fast became the best-selling fund in the UK and has topped the charts since.
The new fund, Woodford Income Focus, is set to pay a higher dividend, which will appeal to investors looking for income. Don’t be surprised to see the name Woodford in the top two fund positions by the end of this tax year.
*Member of Moneywise’s First 50 Funds for beginners
** Source: Chelsea Financial Services. Average level of Isa
Darius McDermott is the managing director of Chelsea Financial Services and FundCalibre.
- Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Mr McDermott's views are his own and do not constitute financial advice.