January to March is the busiest period for the asset management industry, with investors keen to beat the tax deadline through a stocks and shares ISA.
Standard Life GARS has grown £1.6bn year-to-date to £16bn, while FE Alpha Manager Richard Woolnough’s M&G Optimal Income fund has seen inflows of £1.5bn, sending assets under management (AUM) to £10.7bn.
M&G Global Dividend, Newton Real Return and Newton Asian Income have also seen large inflows.
Top-10 bestselling funds over 3months
| Fund Name | Size 3m ago (£m) | Size Now (£m) | Performance Effect on Size (£m) | Underlying approx. in/out (£m) |
|---|---|---|---|---|
| Standard Life Global Absolute Return Strategies | 13,968.50 | 16,023.40 | 451.1 | 1,603.80 |
| M&G Optimal Income | 10,745.28 | 12,795.46 | 545.14 | 1,505.04 |
| M&G Global Dividend | 4,105.61 | 5,602.74 | 614.93 | 882.2 |
| Newton Real Return | 6,854.52 | 7,506.35 | 162.55 | 489.28 |
| Newton Asian Income | 2,876.42 | 3,734.29 | 378.58 | 479.29 |
| First State Global Emerging Markets Leaders | 3,230.48 | 3,981.43 | 329.78 | 421.17 |
| Baillie Gifford Diversified Growth | 2,630.06 | 3,157.69 | 128.49 | 399.15 |
| Fundsmith Equity | 796.49 | 1,184.87 | 117.43 | 270.96 |
| BlackRock European Dynamic | 1,212.20 | 1,668.23 | 192.36 | 263.68 |
| Insight UK Corporate All Maturities Bond | 1,891.69 | 2,160.53 | 10.25 | 258.59 |
Source: FE Analytics
Large funds tend to attract large inflows, so it is unsurprising to see these names attract the most in absolute terms.
However, looking a little further down the list, there are a handful of funds that have grown by a larger proportion of their total size.
Terry Smith’s Fundsmith Equity fund is a good example, quickly becoming a firm favourite with advisers in recent months.
It was only launched in November 2010, but has already grown to £1.2bn, according to FE Analytics data.
A large proportion of those inflows – £271m – have come over the last three months.
Fundsmith Equity has returned 52.08 per cent since inception, making it the second best-performing portfolio in the IMA Global sector, which has 243 constituent members.
Only the L&G Global Health & Pharmaceutical Index fund, which is a tracker, has returned more.
Performance of fund vs sector and index since launch
Source: FE Analytics
It has also comfortably outperformed its benchmark – the MSCI World – which has returned 28.3 per cent over the period, with less volatility.
Darius McDermott (pictured), managing director at Chelsea Financial, says Fundsmith Equity is on his firm’s buy-list and that he is not surprised that it has become popular among investors.
"Firstly, Fundsmith Equity has performed very well since its launch and it has a very high-profile manager in Terry Smith, who uses a simple investment process," he said. "Smith has a very good long-term track record running his pension fund and has largely outperformed every year. He says that he should underperform in a raging bull market – but he hasn’t."
"However, as he invests in resilient cash-generative companies, his fund is likely to be durable in all market conditions."
"Also, as they only run the one fund it is that sort of focus that fund buyers like," he added.
Fundsmith Equity requires a minimum investment of £1,000 and has an ongoing charges fee (OCF) of 1.69 per cent.
Julie Dean’s five crown-rated Cazenove UK Opportunities fund is another portfolio that has grown a huge amount this ISA season.
AUM currently stand at £1.1bn – an increase of almost £300m in the last three months alone.
Dean’s fund has been at the centre of a huge amount of media attention as a result of Schroders’ recent acquisition of Cazenove Capital Management. However, her fund’s consistent track record has more than merited the hype.
Cazenove UK Opportunities is a top-quartile performer in the IMA UK All Companies sector over one, three, five and 10 years.
It is the fourth best-performing portfolio in the sector over five years, with returns of 108.27 per cent, tripling the returns of its benchmark – the FTSE All Share – in the process.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Dean’s portfolio requires a minimum investment of £1,000 and has an OCF of 1.58 per cent.
Investors who want exposure to global emerging markets will no doubt be frustrated at the soft-closure of numerous portfolios across the IMA universe, including Aberdeen Emerging Markets and Aberdeen Global Emerging Markets Smaller Companies.
There are a number of funds looking to fill the void, with M&G Global Emerging Markets taking the most market share.
It has seen inflows of almost £170m so far this ISA season, sending AUM to over £1bn.
McDermott likes manager Matthew Vaight’s style and says he expects the fund to be a future bestseller.
He commented: "The two big emerging market franchises – First State and Aberdeen – have soft-closed a number of their funds to new investors. The Aberdeen funds have started to slow inflows by increasing the initial charges."
"Looking elsewhere, though, it’s not exactly the same; M&G Global Emerging Markets has a similar value process, in that it invests in quality companies and has a relatively low turnover."
"The fund should do well in difficult market conditions, but will also hold its own in rising markets."
M&G Global Emerging Markets has been managed by Vaight since it was launched in February 2009.
Over that time, it has returned 134.22 per cent while the IMA Global Emerging Markets sector has returned 99.79 per cent.
However, it has fallen short of First State Global Emerging Markets and Aberdeen Emerging Markets, which have made 149.44 per cent and 147.57 per cent, respectively.
Performance of funds vs sector since Feb 2009
Source: FE Analytics
It requires a minimum investment of £500 and has an OCF of 1.74 per cent.
M&G Global Macro Bond is another fixed interest portfolio that has shrugged off the supposed "great rotation" into equities, nearly doubling in size to £588.4m. It is headed up by Jim Leaviss.
Over the last three months the top performing sectors in the IMA universe have been IMA Japanese Smaller Companies, IMA North American Smaller Companies and IMA Japan. No fund from any of these sectors made it near the top-10 bestsellers list.
It is not too late to make the most of your tax-free ISA allowance this year. The deadline closes at midnight on 5 April.