The majority of the top-15 most bought funds since the platform launched in March are equity portfolios, with investors have diving into aggressive funds invested in UK smaller companies, European equities and technology.
John Blowers, head of the direct to consumer platform, says investors also seemed to be selecting funds from Trustnet Direct’s Top 100 list of recommended funds. All but four funds in the top 15 feature on the list.
“There is great investor faith in the UK, particularly smaller companies, as well as people betting on a broader European recovery,” he said. “With continuing low interest rates there is also significant investment in income funds.”
FE Alpha Manager Giles Hargreave’s five FE Crown rated UK Micro Cap Growth and flagship Marlborough Special Situations funds topped the list, while the AXA Framlington Biotech fund, which was hard hit by a recent sell-off in tech stocks, also made the cut.
Source: FE Analytics
UK smaller companies
While the Marlborough portfolios were the most popular funds overall in terms of flows, a number of leading UK smaller companies portfolios feature on the list, including the R&M UK Equity Smaller Companies fund and the Liontrust UK Smaller Companies portfolio.
All four portfolios have beaten the IMA UK Smaller Companies sector over the last five years, though the Marlborough Special Situations fund sits in the second quartile over that period.
Performance of funds vs sector over 5yrs
Source: FE Analytics
Still, manager Giles Hargreave has a long track record of beating his peers, and the fund has nearly doubled the returns of the sector over the last decade.
Marlborough Special Situations and Marlborough UK Micro Cap Growth have ongoing charges of 0.8 per cent and 0.81 per cent, respectively. R&M UK Equity Smaller Companies and Liontrust UK Smaller Companies charge more, at 0.99 per cent and 1.43 per cent.
Income
Income continues to be a key theme for investors and with the departure of star manager Neil Woodford from his multi-billion pound Invesco Perpetual Income and High Income funds earlier this year, many investors are seeking a new home for their capital.
The most popular income portfolios on Trustnet Direct are the Artemis High Income fund, managed by FE Alpha Managers Adrian Frost and Adrian Gosden and the five FE Crown rated Rathbone Income fund, headed up by Carl Stick. Some investors are going global for income exposure, selecting the Newton Global Higher Income fund, which has four FE Crowns.
The four FE Crown rated Artemis Income portfolio, which is the most like-for-like trade out of the Invesco funds, is yielding 3.9 per cent and has a long history of outperforming the market and its peers, picking up 142.25 per cent over the last decade.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
However, the fund is primarily composed of blue-chip, income paying stocks which have trailed the recent market rally. The fund is bottom-quartile in the IMA UK Equity Income sector over one year, with returns of 9.35 per cent.
Artemis Income has ongoing charges of 0.79 per cent. Rathbone Income and the Newton Global Higher Income fund charge 0.8 per cent.
Europe
Making a play on the recovery in the developed world, investors are also turning to Europe where valuations are historically lower than in the US or UK, indicating companies in the region may have further room to grow.
Investors’ favoured portfolio is the four FE Crown rated Jupiter European fund, managed by star European equity manager Alexander Darwall.
Darwall’s fund has beaten its peers in the IMA Europe ex UK sector and its benchmark – the FTSE World Europe ex UK index – over three, five and 10 years; however, the fund has trailed both measures over the last 12 months.
Over one year, the fund has made 7.34 per cent, roughly half the returns from the sector and index.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
However, the manager tends to focus on quality, defensive stocks which have lagged the recent rally.
FE Research analyst Charles Younes said the poor performance relative to the sector and benchmark was due to poor stockpicking over the last six months.
“[The manager] identified several stocks which recently led the fund to poor performance. Companies like CGG, Fugro, Vopak and Syngenta suffered from weak demand.”
“Regulatory threats impacted the performance of companies like Novozymes and Fresenius. Finally, companies like Ryanair and Novo Nordisk suffered from commoditisation,” he said.
More tentative investors are piling into the Henderson European Absolute Return fund, which gives investors access to European equities but aims to deliver a positive absolute return in each year.
Henderson European Absolute Return has ongoing charges of 1.21 per cent. Jupiter European charges 1.03 per cent.
