Global tracker funds popular with Lifetime ISA investors in first month of launch
The new ISA launched on 6 April allowing anyone aged 18 and 40 to save into a longer-term tax-free account for their first home and retirement at the same time. See YourMoney.com’s The key Lifetime ISA facts you need to know for more on the scheme.
So far, just three mainstream investment platforms have launched the Lifetime ISA (LISA) product: Hargreaves Lansdown, Nutmeg and The Share Centre. There are currently no cash LISA products on the market, though Skipton Building Society has announced it is set to launch a cash LISA next month.
So which funds are drawing the attention of LISA investors?
More than 13,300 LISAs have been opened to date (more than 10,000 were opened in the first two weeks) and tracker funds have proven the popular choice. Some 18% of LISA investors are aged 39 (the cut off age for the scheme) showing that they want to keep the door open for further LISA contributions with accompanying government bonus throughout their forties.
Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Thousands of younger investors have voted with their feet and selected a LISA in the short time since the new addition to the ISA family became available on 6 April. The LISA may not be widespread in terms of providers yet, but the demand for the new product is clearly there from savers.
“So far LISA investors have shown a propensity for investing in tracker funds, which makes sense seeing as passive funds tend to be more popular with the younger generation. Some of these savers may also be relatively new to investing, and so a tracker fund offers a simple and low cost way to get broad market exposure.”
Cox added that the most popular passive funds with LISA investors so far all track overseas indices, suggesting a preference for international stock markets.
Star fund manager Neil Woodford’s new fund – Woodford Income Focus – has also garnered interest among investors seeking long term total returns.
Below are the top ten bought funds bought by Hargreaves Lansdown LISA investors (in alphabetical order):
- BlackRock Emerging Markets Equity Tracker
- CF Lindsell Train UK Equity
- CF Woodford Equity Income
- CF Woodford Income Focus
- Fundsmith Equity
- Jupiter India
- Legal & General International Index Trust
- Legal & General US Index
- Lindsell Train Global Equity
- Stewart Investors Asia Pacific Leaders
Two weeks ago, the HL Multi-Manager Income & Growth Trust and the HL Multi-Manager Special Situations Trust appeared in the top 10, but they have since been replaced by BlackRock Emerging Markets Equity Tracker and Legal & General US Index.
The online investment platform said it’s not able to give specific product breakdowns but said that on the first day of the LISA launch, 1,217 accounts were opened and there continues to be high interest in the product.
The Share Centre
While The Share Centre can’t disclose exact numbers, it said it “remained very pleased with the take-up so far”.
The Share Centre’s ready-made LISA offers three investment choices: the SF Cautious Fund, the SF Positive Fund or the SF Adventurous Fund. To date the SF Adventurous Fund remains the most popular choice, representing 46% of funds purchased within the LISA, compared to 31.5% for the SF Positive Fund and 22.5% for the SF Cautious Fund.
Broken down by age, 40% of LISA customers aged 18-29 have opted for the Adventurous Fund, compared to 31% Positive and 29% Cautious. In the 30-39 bracket, 50% of LISA customers have chosen the Adventurous Fund, with 32% going for Positive and 18% going for Cautious.
Overall, 5% of customers have subscribed their full LISA allowance of £4,000.