Most-bought investments: March 2023

Active fund drought continues, while investors snap up banks, and trust investors set their sights on income strategies.

• Fundsmith Equity is the only active pick in the fund best buys in March – as was also the case in January and February. This compares to three active funds in the December list of most bought investments on ii
• Usual tech-favourite among ii investors, Tesla, drops from three to 10 in most-bought equities
• FTSE heavyweight Vodafone drops out of top 10 stocks, but HSBC, M&G, and Aviva join the list
• Income strategies dominate most-bought investment trusts in March, as do some of Britain’s oldest and largest global investment trusts
• UK-focused investment trusts start to catch investors’ eye, and Law Debenture joins the top 10 most-bought investment trusts

interactive investor, the UK’s second-largest investment platform for private investors, outlines the most-bought investments on its platform in March 2023. March's data coincides with the end of the tax year, where some investors will have been trying to make the most of their annual ISA allowance.

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Amid jitters in the banking sector due to the collapse of Silicon Valley Bank and the rescue of Credit Suisse (SIX:CSGN) by local rival UBS (SIX:UBSG), private investor demand for banking stocks was undimmed. Among direct equities, Barclays (LSE:BARC) and Lloyds (LSE:LLOY) made second and third place on the list of most-bought stocks in March, with HSBC (LSE:HSBA) making eighth position.

ii’s monthly platform purchases data suggests that some investors have given up trying to find an active fund that could deliver better returns, after a tough 2022, turning instead to passive strategies. Others might see this as a contrarian indicator.

Certainly, investment trust investors are deploying a wide range of active strategies, from renewable energy through to mining, while also embracing some of the Global and UK Generalists, with a focus on the AIC Dividend Heroes. Many of these have been serving shareholders for generations, through boom and bust, depression and war. In times of uncertainty and volatility, the likes of F&C (LSE:FCIT) and Alliance Trust (LSE:ATST) have a habit of returning to favour.

Direct equities in detail

Victoria Scholar, Head of Investment, interactive investor, says: “March’s price action was characterised by turmoil in the banking sector, but despite this, Lloyds and Barclays, retained their spots on the list of most popular stocks. Both companies suffered from lacklustre share price performances, ending the month in the red. NatWest Group (LSE:NWG), however, which was on the most-popular list in February, didn’t make the cut this month.

“Nevertheless, we saw some newcomers. HSBC, for example, was a new addition to the list after its acquisition of SVB UK, as investors pinned hopes that the purchase could help boost the shares. Despite coming under pressure in March, shares in HSBC are still in positive territory year-to-date, sharply outperforming the FTSE 100.

“M&G (LSE:MNG) and Aviva (LSE:AV.)were two other new additions to ii’s most-bought equities list in March. Both stocks suffered over the course of the month, and therefore opportunistic investors appear to be capitalising on their share price declines to pick up these stocks at a discount, amid hopes of a recovery as the banking crisis eases.

“Rolls-Royce (LSE:RR.) held on to its spot on the list of best buys in March. The FTSE 100 engine maker has had an incredibly strong start to 2023 in terms of its share price, up by over 50% thanks to the revival in aviation post-Covid as well as its new CEO Tufan Erginbilgic, who appears to be charming investors with his transformation plans.

“BP (LSE:BP.)dropped down one place, to number seven. Shares peaked in February and faced selling pressure until mid-March, but the stock has started to regain ground since with a sharp share price boost to kick off the first trading session of April after OPEC+ surprised the market with an output cut designed to boost oil prices.

“EV giantTesla (NASDAQ:TSLA), which is often one of the most widely bought stocks on the ii platform, dropped from number three in February to 10 in March. After the 2022 ‘tech wreck’, which saw shares suffer a 65% slide, Tesla has had a terrific start to the year, up around 90%. After a very strong January and February, perhaps investors are holding off for a correction to find an attractive entry point to start buying the stock again. Although shares have surged so far in 2023, the stock is still trading at around half its valuation from the all-time high in November 2021.

“Frequent ii top 10 pick Vodafone Group (LSE:VOD), didn’t make it into the list of best buys in March. After a strong start to the year, shares have been under pressure since mid-February, hovering near 2002 lows. It reported weakness in its biggest market, Germany, in February and has announced plans to cut jobs in Europe. Last year, the telecoms giant cut its annual profit forecast and its CEO Nick Read stepped down at the end of 2022.”

Funds and investment trusts in detail

Commenting on the most-bought funds and investment trusts on ii during the month of March, Kyle Caldwell, Collectives Specialist, interactive investor, says: “Fund investors looking to make their most of their ISA allowance in the run-up to tax year end have continued to favour passive strategies.

“As was the case in January and February, nine of the 10 most-bought funds on the interactive investor platform last month were passive funds, or funds that use passive strategies, which follow the up and down fortunes of an index.

“For me, there are a number of factors at play. One is that some investors are throwing the towel in on trying to find an active fund that could deliver better returns. In theory, periods of stock market turbulence give active fund managers greater ability to add value as they can make changes to portfolios to protect capital.

“However, active funds did not cover themselves in glory in 2022* when markets were volatile, as a recent study by Morningstar found. But one year is a very short period of time, and some contrarian investors may choose to see this as a reverse indicator.

“Another driver is that investors are unsure where to put their money at the moment, given there’s no shortage of headwinds. As a result, the broad exposure passive funds offer is being favoured, rather than investors targeting more focused active fund exposure.

“One area where some professional fund buyers have been turning to of late is UK smaller companies on valuation grounds, but private investors are shying away.

“In terms of investment trusts, the key theme is investors increasingly focusing their sights on income strategies. This trend continued in March, with Law Debenture (LSE:LWDB) entering the top 10 in ninth place, and bringing the number of income-focused trusts in the top 10 to four. This UK equity income trust is different from rivals as it has two separate arms – an investment portfolio and an independent professional services business. The fund managers of Law Debenture are James Henderson and Laura Foll, who manage other funds and investment trusts, including Lowland (LSE:LWI) Investment Company.

“It’s also interesting to see that the UK appears to have come back into vogue for trust investors, with UK-focused investment trusts accounting for four out of 10 of the best buys, although there was just one solitary UK fund in the best buys, as was the case in February.”

Top 10 most-bought investments on interactive investor in March 2023

*On average, 30.5% of active equity managers outperformed their average passive peer in 2022, according to a study by Morningstar.