Investors have poured huge sums of money into tracker funds over the past year as the shift away from active management and towards passives continues, research by FE Trustnet shows.
However, while there have been some very high-profile examples of active funds haemorrhaging assets – Neil Woodford and his LF Woodford Equity Income fund being the most obvious – some stock pickers are still seeing asset growth thanks to their very strong track records and inflows.
In this article, we have compared the current assets under management (AUM) of all the funds in the Investment Association universe with where they were one year ago, to find out which have grown the most on the back of inflows and performance.
Sitting at the top of the table is the Vanguard LifeStrategy 60% Equity fund. It was £4.5bn in size this time last year but has grown to £6.7bn today, an increase of £2.16bn.
AUM of Vanguard LifeStrategy 60% Equity
Source: FE Analytics, data to end-Aug 2019
As the chart above shows, the fund has been on a relentless upward trend for the past several years. Its AUM has been buoyed by strong performance (its currently in the IA Mixed Investment 40-85% Shares sector’s top quartile over one, three and five years) but has also attracted net inflows of around £1.75bn over the past year.
Indeed, Vanguard’s LifeStrategy range – which is five multi-asset funds built from individual Vanguard index trackers – have been very popular since launch in 2011 because of their low fees, easy-to-understand approach and strong returns.
Two other members of the range (Vanguard LifeStrategy 40% Equity and Vanguard LifeStrategy 80% Equity) are among the 25 funds with the strongest AUM growth of the past year, while its two remaining strategies aren’t much further down the list.
But these funds aren’t the only index trackers that had some of the strongest AUM growth in the Investment Association universe.
The table below has plenty of passives on it, including Vanguard FTSE U.K. All Share Index, Vanguard FTSE Developed World ex-UK Equity Index, State Street UK Equity Tracker, ASI Global Corporate Bond Tracker and BlackRock ACS World ex UK Equity Tracker.
Source: FE Analytics, data to end-Aug 2019
This is in keeping with wider trends being seen in the asset management industry. The latest figures from the Investment Association showed that there is now £215bn held in tracker funds, taking their overall share of industry funds under management to around 17 per cent.
However, this does not mean that investors have been completely avoiding active funds.
Royal London Global Equity Diversified appears in second place on the above list after its AUM went from £115m to £2.2bn. While some of this was down to positive performance, the bulk of it was because of inflows.
The fund, which is run by Royal London Asset Management head of global equities Peter Rutter, launched in October 2017; since then it has made a 21.09 per cent total return, compared with 14.01 per cent from its average IA Global peer and 18.18 per cent from the MSCI World index.
In a recent interview with FE Trustnet, Rutter said a key element to his approach is buying companies “no one has heard of” as this is the only way to outperform in the highly competitive IA Global sector.
“We’ve good performance, but we’ve done it quite differently, with companies that no one’s ever heard of. But that’s good. That’s our job,” he said.
“To be successful, you need to do something different. That’s valuable because there are a lot of people competing in global equities.”
Performance of fund vs sector and index since launch
Source: FE Analytics
A number of well-known active funds have also continued to attract large amounts of fresh investor cash over the past year. Many examples are UK equity strategies, despite the challenges facing this part of the market.
FE Alpha Manager Nick Train’s LF Lindsell Train UK Equity fund has grown to £7.3bn in size, an increase of £1.5bn over the 12 months in question. Train remains one of the most respected stock pickers in the business, with a focus on stable, cash-generative businesses with strong management teams.
The FE Invest team said: “We like the consistency of his strategy, which will not vary, depending on economic conditions. His very selective approach results in a highly concentrated portfolio, which should boost the fund’s returns if his stock picking is successful.”
Liontrust Special Situations is another top-performing fund that continues to attract inflows. Run by the FE Alpha Manager duo of Anthony Cross and Julian Fosh, the strategy’s Economic Advantage process hones in on companies that have durable competitive edges such as intellectual property, strong distribution networks and recurring revenue streams.
FE Alpha Manager Keith Ashworth-Lord’s CFP SDL UK Buffettology fund is another notable inclusion on the above list. It has grown to £1.2bn, which is an increase of £714m over the period under review.
The fund has an official licence to use Warren Buffett and Benjamin Graham’s investment style, which leads it to companies that have consistently high profitability and cash generated from intangible assets such as brands, people and patents.
Earlier this year, Ashworth-Lord discussed the high inflows into the fund that have followed after several years of strong outperformance.
“I am often asked how the size of the fund is impacting investment decisions,” the manager said. “In terms of style, the answer is obvious – not in the slightest. I will continue to practice the disciplines of Business Perspective Investing regardless of AUM.”