The fall in sterling, which started in April and continued in May ensured that investors in overseas markets benefited handsomely in May.
With the Nasdaq also hitting new highs, generating 5.3% in May in dollar terms and 9% for UK investors, those who were fortunate enough to be invested in US and global technology funds generated significant returns.
Most popular funds bought in May 2018
|2||Lindsell Train Global Equity||Global|
|3||Vanguard LifeStrategy 80% Equity||Mixed Investment 40%-85% Shares|
|4||Baillie Gifford Global Discovery||Global|
|5||Baillie Gifford American||North American|
|6||Legg Mason IF Japan Equity||Japan|
|7||Baillie Gifford Japanese Smaller Companies||Japanese Smaller Companies|
|8||Vanguard LifeStrategy 100% Equity||Global|
|9||AxaFramlington Global Technology||Technology & Telecommunications|
|10||Henderson Global Technology||Technology & Telecommunications|
Source: Interactive Investor
Terry Smith’s Fundsmith Equity was the most-bought fund among ii clients, as it has been every month since late-2015. Lindsell Train Global Equity also remains popular and has a similar asset allocation to Fundsmith.
Rebecca O’Keeffe Head of Investment at interactive investor says: “Both funds are biased towards US stocks, as is the nature of the global equity sector, and that has benefitted investors in recent weeks, with the fall in sterling and rising US equities giving UK investors a major boost.”
Vanguard LifeStrategy has two funds in the top 10, but among our investors there has been a noticeable shift away from passive funds and into active investments over the past few months.
O’Keeffe says: “The volatility within and across individual sectors offers opportunities for active fund managers to generate additional returns, and this is encouraging investors to favour active fund managers over passive funds despite the higher fees associated with these funds. With an average return of 9% for the active funds in the Top 10, compared with 3.3% for the passive options, our investors have been on the money.”
Baillie Gifford has three funds in the Top 10, including the two best performers. Here, the funds’ focus is predominantly global technology. Baillie Gifford American’s top holdings include all the FANGs, which has been a hugely successful strategy for the fund. Baillie Gifford Global Discovery is weighted towards Healthcare and IT sectors, and it received a helpful boost in May from its holding in Ocado.
O’Keeffe says: “As well as the shift from passive to active funds, what is perhaps most noticeable about our top-10 list is what it does not contain. There are no UK-focused funds. Nor are there any funds targeting emerging markets or commodities. For now, this is proving an extremely successful strategy, with the interminable political wrangling over Brexit weighing on many UK companies’ performance, and a wide range of emerging markets suffering sharp declines as their supply of easy liquidity is progressively withdrawn. “