Popularity for UK-focused funds showed no sign of easing in April and users continued to invest for income, the latest data from our sister website Interactive Investor shows.
Managed by John McClure, the Unicorn UK Income fund was the most bought in April, up from its second-place ranking in March.
The fund is the best performing in its sector over three years. It aims to deliver a gross yield 10% higher than the FTSE All Share Index, and its returns of 28.1% over one year and 69.3% over three beat both its IMA UK equity income sector and the FTSE All Share Index. The All-Share saw gains of 10 and 30.4% respectively. At 6 May the fund's size was £687.3 million.
McClure invests largely in the support services, travel and leisure and the financial services sectors. Growth in the services sector bolstered a 0.8% increase in first-quarter GDP, the Office for National Statistics reported last week.
Head of investment at Interactive Investor Rebecca O'Keeffe expects popularity for UK-focused funds to continue, as supportive policy is unlikely to be removed.
"As emerging markets remain subdued and valuations in the US and Europe look high, investors are focusing their attention on the UK as a potential source of return. Government and Central Bank policy has provided a positive backdrop for UK companies in the past few years and investors can expect this support to continue, as politicians and central bankers will be reluctant to do anything to compromise the recovery," she says.
"Across the board, growth is less likely than it has been and the key driver for share prices is more likely to come from earnings, rather than general economic sentiment."
The CF Miton UK Smaller Companies fund also made the ten most-bought list in April at number two, and is managed by Gervais Williams. He adopts a bottom-up investment approach by focusing on specific companies rather than broader industries or the economy as a whole.
The Marlborough UK Micro Cap Growth fund was the third most-bought fund in April and outperformed its sector with growth of 40.9% over 12 months and 77.7% over three years.
The fund is managed by Giles Hargreave, who only invests in companies which, at the time of purchase, have a market capitalisation of £250 million or less. His largest holdings include Utilitywise, Eckho and Cello Group.
The HSBC FTSE 250 Index, which aims to match the performance of the index with the same name, made its debut on the 10 most-bought funds list this year, ranked seventh. Its size is £1.1 billion and it is heavily weighted in the financials, oil and gas and consumer goods sectors, with HSBC, BP and Royal Dutch Shell its largest holdings.
The last of the UK-focused funds to make the grade in April was Ken Hsia's Investec UK Smaller Companies, which is valued at £650.1 million. Ranked number 10, the fund saw sector-beating returns of 40.7% over one year and 74% over three. It is heavily weighted in the consumer services, technology and industrials sectors and its largest holdings include Quindell Portfolio, Plus500 and National Express Group.
But O'Keeffe warns investors in UK-focused funds to keep an eye on company results to protect their holdings.
"Better-than-expected corporate results should result in positive valuations, but, as we've already seen from companies such as ASOS, earnings which disappoint the market are likely to result in a swift deterioration in sentiment and hit share valuations hard."
Popularity for the Axa Framlington Biotech fund eased in April, after it enjoyed top slot for the two previous months. At 6 April the fund's size had shrunk to £293.2 million from £326.3 million at 28 March.
Both the Invesco Perpetual High Income and Invesco Perpetual Monthly Income Plus funds were popular in April, coming in at ninth and fourth respectively.
Previously run by Neil Woodford, the former is managed by Mark Barnett, is valued at £13.1 billion and has seen sector-beating returns of 11.7% over one year and 45.3% over three. While Barnett primarily invests in UK companies, the Invesco Perpetual Monthly Income Plus fund looks to achieve income and capital growth over the medium and long term by investing in global corporate and government high yielding debt securities.
Paul Causer manages the latter fund, which is heavily weighted in the banks sector and saw one year returns of 5.3% and three-year returns of 23.6%, beating its sterling strategic bond sector.
O'Keeffe puts the popularity of income funds down to early-bird Isa investors. "The dynamic between Isa investors who take advantage of their Isa at the start of the tax year and those who invest towards tax year end is quite pronounced, with early bird investors more likely to be income investors who are looking to generate a higher income as soon as they can - while investors who take advantage of their Isa allowance in the last few weeks of the tax year tend to focus on long-term growth," she says.
Managed by Adrian Frost, the Artemis High Income fund was the fifth most-bought fund in April on Interactive Investor. The fund is top in its sector over three years with sector-beating returns of 9.5% over one year and 35.7% over three. The fund is heavily invested in the UK and its holdings are largely in the financial services and insurance sectors.
First State Asia Pacific Leaders was the seventh most-popular fund last month; although it saw sector-beating returns of 14.9% over three years, it saw a loss of 6.9% over one, compared to the sector loss of 6.6%. The fund is mostly invested in the financial sector.
This article was written for our sister website Money Observer