Terry Smith and Neil Woodford top 2016’s favourite funds list
Top of the popularity table was the Fundsmith Equity fund, managed by veteran investor Terry Smith.
“He’s developed a considerable fan club of investors who like his no nonsense buy-and-hold approach and the fact he doesn’t sit on the fence with his views,” says Bestinvest’s managing director Jason Hollands.
“The performance has been stellar since launch and the fact Terry ploughed an additional £115m of his own spare cash into the fund during the year, taking his personal interest in the fund to over £200m, is a big vote of confidence in the portfolio of global blue chip companies he holds.”
CF Woodford Equity Income
Star manager Neil Woodford’s fund landed second place. The fund is a staggering £9.3bn in size despite only launching two years ago.
“Second place in 2016 is quite an achievement when according to [trade body] Investment Association [sales] data, UK equity funds have been consistently out of favour with retail investors,” says Hollands.
Stewart Asia Pacific Leaders
Emerging market equities and Asian markets have had a tumultuous year, but rebounded strongly over the summer after a shaky start to the year so Hollands says “it is unsurprising” to see Stewart Asia Pacific Leaders high up the list.
“The team continues to have the highest weighting to India, of 24.7%, with Taiwan 18.5% the next largest weighting,” says Hollands.
Threadneedle UK Equity Income
In fourth place was Threadneedle UK Equity Income, managed by Richard Colwell.
“His fund currently has a defensive skew that focuses on total return. It is very underweight financials compared to its FTSE All-Share benchmark, and in the last three months has increased its position in AstraZeneca, while reducing its stake in retailer Marks and Spencer,” says Hollands.
Threadneedle European Select
In fifth place was another Threadneedle fund, this time its European Select proposition. The fund retains its bias to consumer goods, with healthcare, consumer services and chemicals also areas of focus.
“Financials are a considerable underweight due to concerns over the European banking sector. The fund aims to seek out companies with strong brands that are less sensitive to price-based competition and as such the fund invests heavily in firms such as Unilever, the multinational consumer goods company, and the world’s largest brewer Anheuser-Busch InBev,” says Hollands.
Liontrust Special Situations
The fund, manged by Julian Fosh and Anthony Cross, has managed to achieve both significant and consistent outperformance over the long term, but with less volatility than the UK market, says Hollands.
“The companies the fund invests in have distinct characteristics, like ownership of intellectual property, strong distribution channels or significant recurring revenue streams whether they are large, medium sized or smaller companies.”
Top holdings include Domino’s Pizza, quality assurance group Interlek and professional services data provider RELX.
HSBC American Index
This tracker funds follows the S&P 500 index, which is notoriously hard for active managers to beat.
Hollands says: “Over the last five years managers of US equity funds have struggled to keep up with a bull market in US shares lifted on a tide of cheap money. No wonder, then, that many investors have given up entirely on active funds for their US exposure, choosing low-cost trackers instead.”
AXA Framlington UK Select Opportunities
In eighth place is AXA Framlington UK Select Opportunities, which is run by veteran manager Nigel Thomas who has been managing funds in the UK All Companies sector for over 28 years.
“He does not invest in contractors, housebuilders, airlines or hotels because of a combination of low margins and low barriers to entry, preferring instead to stick with well-known consumer brands with strong cash flow generation,” says Hollands.
The fund’s top holdings include Paddy Power Betfair, ITV and Dixons Carphone.
Legg Mason Japan Equity
This top-performing Japan fund over multiple timeframes is managed by Tokyo-based veteran Hideo Shiozumi.
His focus is ‘new Japan’, growth companies in sectors such as healthcare and information technology that can meet the widespread challenges presented by an aging population.
“This year UK investors in Japanese equity funds have benefited heavily from currency movements as the yen has strengthened sharply versus sterling,” says Hollands.
Standard Life GARS
Targeted absolute return funds were popular this year with retail investors, only Standard Life GARS made it into the top ten list.
“GARS is the market leader in this space, though there are now a number of rival funds now challenging it from the likes of Aviva and Invesco Perpetual,” says Hollands.