October was a period of recalibration, when investors’ focus and anxieties shifted from the likelihood of a ‘hard Brexit’ early in the month to the tightening race between Hillary Clinton and Donald Trump for the US presidency.
Despite the shifting macro risks, Tilney Bestinvest said the funds considered most popular with clients did not change dramatically. While clients continued to show a preference for long-established active equities fund managers like Terry Smith and Neil Woodford; in US equites, passive funds continued to be popular.
“It is easy to see why,” said Bestinvest managing director Jason Hollands, “as little more than 6% of funds in the IA North American sector have managed to outperform the S&P 500 Index over the same time period but it is also the case that if markets react badly to the US election result, index funds are going to full participate in any slide with no scope for taking defensive positions.”
This preference for US passive funds was reflected in Tilney Bestinvest’s list of the top 10 most popular funds this month where HSBC’s American Index fund ranked in ninth place. The fund tracks the S&P 500 index, which Hollands noted, is “notoriously hard for active managers to beat”.
With US equity funds struggling to keep pace with “a bull market in US shares lifted on a tide of cheap money,” Hollands said it is easy to see why investors have embraced low-cost trackers instead.
“The HSBC American index tracker fund has a very low ongoing charges figure of 0.08%. However, with one of the most acrimonious presidential elections in recent history underway and the US Federal Reserve Bank contemplating future interest-rate hikes, the US market could face some volatile times ahead,” he cautioned.
The Vanguard LifeStrategy 80% fund, which is wholly comprised of index tracker funds, made Tilney Bestinvest’s 2016 top 10 list for the first time, landing in seventh place. Its highest allocation is toward North American equities, followed by UK equities and global bonds.
Equity fund tops
Elsewhere in the investment world, equities and multi-asset funds remained the most beloved by Tilney Bestinvest clients.
The Fundsmith Equity fund, held onto its title as the most popular fund for the fifth month running. Meanwhile, Woodford’s flagship equity income fund landed in third place for the first time in fourth months, as the Tilney Bestinvest Growth portfolio snagged the second best top spot.
On the emerging markets front, longstanding top rated vehicle, Stewart Asia Pacific leaders, proved the fifth most popular fund among clients, helped along by the summer rebound in EM equities and Asian markets.
Also making the top ten list was the Liontrust Special Situations fund at number six, managed by Julian Fosh and Anthony Cross, as well as Threadneedle’s European Select and UK Equity Income funds, which finished in eighth and tenth place.