Professional investors continued to pay more attention to popular funds like Fundsmith Equity, Lindsell Train Global Equity and Vanguard’s LifeStrategy range last month, although some less well-known strategies were also on their radars.
After several months of relative calm in 2019, May threw investors a curveball after the trade tensions between the US and China were re-ignited. The US Trump administration said it would hike tariffs on $200bn of Chinese goods and China retaliated with tariffs on $60bn of US imports.
Closer to home, Theresa May announced that she would step down as UK prime minister on 7 June – triggering a leadership contest within the ruling Conservative party and a fresh bout of political uncertainty as the country struggles to find a way to depart the EU with a deal.
In this monthly article, we reviewed the Investment Association universe to find out which funds were being researched more heavily in May 2019 when compared with the previous 12 months.
Sector research share change between May 2019 and previous 12 months
Source: FE Analytics Market Intel Tool
The chart above, which shows the change in each Investment Association sector’s share of FE Analytics research activity over the period, reflects a trend that has been seen for some time – more interest in global equities and multi-asset portfolios.
Over the 12 months to the start of May, funds in the IA Global sector accounted for 8.28 per cent of research into the Investment Association universe on FE Analytics; during May, the peer group’s research share climbed to 9.78 per cent.
Increased interest in global equities has been a constant theme since the UK voted in June 2016 to leave the EU. Since then, money has been consistently pulled out of UK strategies and global portfolios have been some of the main beneficiaries of this as investors sought geographical diversification.
The four multi-asset sectors – IA Flexible Investment, IA Mixed Investment 40-85% Shares, IA Mixed Investment 20-60% Shares and IA Mixed Investment 0-35% Shares – also continued to increase their share of research activity, in keeping with the desire for diversification.
Defensive areas like IA UK Gilts and IA Volatility Managed also got more attention in May after the renewed trade tensions led to more difficult market conditions.
Turning to the individual funds that were being researched more last month, the list is topped by Vanguard LifeStrategy 60% Equity, Fundsmith Equity and Lindsell Train Global Equity. These funds have benefitted from steadily increasing interest for several months now, so rather than take yet another look at them this article will focus on some of the other names on the table below.
Source: FE Analytics Market Intel Tool
One notable member of the list is the CFP SDL UK Buffettology fund, which is headed up by FE Alpha Manager Keith Ashworth-Lord. Strong performance means the fund has been appearing on more and more investors’ radars – even as the IA UK All Companies sector has been suffering outflows.
The fund’s factsheet for April highlighted some of the reasons for its growing popularity. “The fund had its best month ever as the Institutional Income (I) Class rose by 11.2 per cent from 292.18p to 324.76p compared to a gain of 2.3 per cent for the UK stock market,” Ashworth-Lord said.
“Within the portfolio, 28 of our holdings advanced and three fell (one was unchanged). There were 16 double-digit risers led by Scapa (up by 40.1 per cent), AB Dynamics (39.8 per cent), Games Workshop (30.9 per cent), RWS (25.2 per cent) and Air Partner (24.9 per cent). None of the fallers were double-digit.
“It was an astonishing month for inflows, which totalled £144.4m net of redemptions. The quantum of aggregate investment was £102.5m. Inflows and investment performance together meant that AUM increased from £675.1m to £872.2m.”
Certain property funds also appear to be capturing more research from professional investors, which may be another sign that they are concentrating on diversification within portfolios.
The iShares Global Property Securities Equity Index (UK) fund is the strategy that had the fourth largest uptick in research last month. This is a track that aims to mirror the FTSE EPRA/NAREIT Developed index, which comprises listed real estate companies and Reits.
More than half of the tracker fund is invested in the US, with 10.74 per cent in Japan and 8.39 per cent in Hong Kong. It has outperformed its average IA Property Other peer over one, three and five years; over five years it made 72.02 per cent, compared with 44.98 per cent from the sector.
Other property funds that the professionals paid more attention to in May 2019 include Schroder Global Cities Real Estate, TIME Investments Commercial Long Income PAIF and L&G UK Property.
Source: FE Analytics Market Intel Tool
At the bottom of our list is Fidelity Special Situations. This is the same as in previous months and is down to the fact that the fund witnessed a significant boost to research in 2018, which has since tailed off to more normal levels.
Also following a trend seen in recent months is several funds run under the Aberdeen banner receiving less interest than they have in the past.
Several other notable funds were being researched less heavily in May, including Invesco Global Targeted Returns, Threadneedle UK Equity Income and LF Woodford Equity Income.