CF Woodford Equity Income, Standard Life Investments Global Absolute Return Strategies and Artemis Global Income are some of the funds to benefit from the highest inflows over the past 12 months, according to FE data, although the list of the 10 best sellers also includes three index trackers.
The past 12 months have proven to be a tricky time for markets with a multitude of concerns sparking a strong correction at the start of the period, many global indices reaching record highs in the early months of 2015 and the resurgence of volatility has been witnessed over the past quarter.
Performance of indices over 1yr
Source: FE Analytics
Investors have continued to buy funds over this period but not always with the same vigour as when markets seemed to be on a relentlessly upward march; ISA season was particularly weak, for example, with net retail sales of £1.6bn in April compared with £3bn the year before.
Buying has also been concentrated in a handful of sectors with IA UK Equity Income topping the leaderboard in the retail sales data released by the Investment Association in most months, with the occasional appearance from IA Targeted Absolute Return, IA Property and IA Europe ex UK.
Over this time, the IA UK All Companies sector is one that has found itself with the worst net retail sales in the most number of months.
As an aside, the picture has been very different in the institutional space where the IA Targeted Absolute Return sector has been the most popular in 10 of the past 12 months. IA Asia Pacific ex Japan has been the sector finding itself at the bottom of the institutional sales table most often.
But given the overwhelming popularity of UK equity income funds with retail investors over the past 12 months it’s no surprise to see one of the biggest names of the sector topping the overall sales charts.
Source: FE Analytics
Our data shows that Neil Woodford’s (pictured) CF Woodford Equity Income fund has taken more than £3.5bn over the 12 months to the end of July 2015, which when combined with a positive effect from performance over the period means total assets now stand at £6.7bn.
Of course, the fund only launched in June last year and broke records when it raised £1.6bn during its two-week offer period. That hasn’t been the only record launch for the FE Alpha Manager in the recent past, as his Woodford Patient Capital Trust raised a record £800m when it floated on the London Stock Exchange in April 2015.
Over the 12 months to the end of July, CF Woodford Equity Income was the highest returning fund in the IA UK Equity Income sector, posting a total return of 21.64 per cent while its average peer made less than half of this. Its FTSE All Share benchmark, meanwhile, was up just 5.38 per cent.
Performance of fund vs sector and benchmark over year to 31 Jul 2015
Source: FE Analytics
This performance profile and the manager’s long success at the helm of Invesco Perpetual’s flagship UK equity income funds, which was built on his preference for blue-chip defensive stocks, means CF Woodford Equity Income has been awarded the top ‘AAA’ rating by Square Mile.
“We conclude that this is a compelling investment proposition and one most worthy of consideration by long-term investors,” the fund research house’s analysts said. “There is a clear and understandable investment process in place, which has been used by Woodford for many years.”
“Woodford's investment track record is extremely impressive and though his contrarian nature can lead to periods where investors may require a dash of patience, he has proved time and again that this patience is ultimately a wellrewarded virtue.”
The £26.1bn Standard Life Investments Global Absolute Return Strategies fund, which is known as ‘GARS’, sits in second place after taking just over £3.4bn over the period in question. The fourth most popular fund – Invesco Perpetual Global Targeted Returns – should also be mentioned as it was launched by the team instrumental in the success of GARS.
Both funds reside in the IA Targeted Absolute Return sector and aim to mark positive returns regardless of market conditions. They do this by building diversified portfolios of ‘strategies’ in the case of GARS and ‘ideas’ for the Invesco fund that span multiple assets classes and currencies.
Over the 12 months to the end of July, GARS posted a total return of 5.73 per cent while the £2.9bn Invesco Perpetual Global Targeted Returns is up just 3.10 per cent. However, this cuts off the strong market falls that were seen in August and during September so far; if the time frame is expanded, there’s only 20 basis points between the two funds.
Performance of funds since 31 Jul 2014
Source: FE Analytics
Earlier this year FE Trustnet looked at the arguments for pairing the two funds up rather than holding them in isolation as the Standard Life Investments vehicle tends to have a higher correlation to equities while Invesco’s is more correlated to bonds.
Ben Willis, head of research at Whitechurch Securities, said: “This goes to show you can hold them together. Don’t expect them to behave in the same manner – they can complement each other very well.”
“They shouldn’t be replicating each other because there are two sets of teams making diverse calls on wide-ranging areas of the market, so it would be unusual for them to have completely aligned thoughts and for the strategies to run in the same direction. They have such a broad universe to work in – both running 20-plus strategies across the whole investment universe.”
The third, fifth and sixth spots on the list are taken by index trackers – SSgA UK Equity Tracker, Vanguard FTSE UK All Share Index and SSgA Europe ex UK Equity Tracker respectively – reflected greater investor interest in low-cost passive funds.
SSgA UK Equity Tracker and Vanguard FTSE UK All Share Index both have an FE Passive Fund Rating of five, which is the highest available, and have ‘recommended’ status from Square Mile. SSgA Europe ex UK Equity Tracker has a FE Passive Fund Rating of three.
Other notable names on the list include Jacob de Tusch-Lec’s Artemis Global Income fund, which has taken in £1.1bn to reach £2.4bn in size. The fund has proven to be immensely popular over recent years – at the start of 2013 it had yet to break through the £100m barrier.
One of the reasons for the attention on the fund is its stellar performance profile. FE Analytics shows it is first decile over one, three and five years; indeed, it was the highest returning fund in its sector on one and three-year views.
It also beat its average peer in the 12 months to 31 July, but slightly lagged its MSCI World benchmark.
Performance of fund vs sector and benchmark over year to 31 Jul 2015
Source: FE Analytics
Artemis Global Income was recently added to the FE Invest Approved Funds List (formerly known as the FE Select 100).
FE Research said: “We have been impressed not only by the manager’s capacity to read the macro-environment, but also his understanding of the dynamics of global equity markets. It helped that the manager differentiated his product from its peers, despite stock selection remaining the main source of outperformance.”
Henderson UK Property has also been one of the most popular funds over the last year, reflecting the trend for investors to allocate more to this asset class over recent years, while Fundsmith Equity continues to attract investors on the back of manager Terry Smith’s strong track record.