Top 10 most-popular investment funds: January 2021
Did Terry Smith’s Fundsmith Equity return to the top spot?
1st February 2021 15:15
by Nina Kelly from interactive investor
Did Terry Smith’s Fundsmith Equity return to the top spot?
At the end of 2020, Terry Smith’s Fundsmith Equity was knocked into second place by Baillie Gifford American. It marked the first time since June 2018 that Fundsmith Equity was not at the top of our list of most-bought funds, which is based on the number of buys during the month by interactive investor customers.
However, last month the perennially popular Fundsmith Equity was back in the number-one spot. With a fund size of £23.2 billion, a recent interactive investor analysis turned the spotlight on Terry Smith’s global growth fund, examining why size could be a problem for investors.
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Some commentators have voiced concerns about performance-chasing by investors in Baillie Gifford American, now in second place, after its fantastically strong showing in 2020. The portfolio’s top holding is Tesla (NASDAQ:TSLA) (8.4%), which has experienced a remarkable surge in its share price, although investor views on the company are split. Some question the valuation of Elon Musk’s electric car firm, which is worth more than Toyota, Volkswagen, Hyundai, General Motors and Ford put together, while its fourth-quarter results fell below analysts’ expectations. Tesla, of course, is only one holding in Baillie Gifford American’s portfolio, which includes an arsenal of big tech names and exposure to a range of sectors including information technology (30.8%), consumer discretionary (29%) and healthcare (14%).
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In January, while Baillie Gifford funds still accounted for most of the funds in our top 10 ranking, the number fell from seven to six, as Premier Miton UK Smaller Companies’ entry pushed out Baillie Gifford Managed. Premier Miton UK Smaller Companiesjoins in ninth place. The fund, which is overseen by highly experienced manager Gervais Williams alongside Martin Turner, was among the top 10 funds for performance following the announcement of a viable Covid-19 vaccine in November. The small-cap fund’s popularity can be attributed to a value revival, vaccine optimism and last year’s Brexit trade deal positively influencing the perception of UK equities.
As the name suggests, Premier Miton UK Smaller Companies invests in AIM (71.6% index weighting), small and micro-cap UK businesses. Its top 10 holdings, as at 31 December, include mining and exploration firm Jubilee Metals (LSE:JLP), electrical products retailer AO World (LSE:AO.), and Corero Network Security (LSE:CNS). In a video interview with interactive investor, Gervais Williams recently explained the rationale for holding Jubilee Metals and Corero.
Looking East,Baillie Gifford China has risen three places to number four. As our Saltydog writer Douglas Chadwick explained recently, China was the only major global economy that managed to grow in 2020, and “the International Monetary Fund has forecast that the Chinese economy will grow by 7.9% this year”. Many investors, it seems, are willing to stomach emerging markets’ notorious volatility in the hope that China funds will deliver. Baillie Gifford Pacific, which has a 46.6% exposure to China, remains in sixth place. The fund’s top 10 holdings include South Korea’s Samsung Electronics (LSE:SMSN), e-commerce giant JD.com (NASDAQ:JD) and Taiwan Semiconductor Manufacturing Company (NYSE:TSM).
Other Baillie Gifford funds in our top 10 table that have also retained their place this month are Baillie Gifford Positive Change (third), and Baillie Gifford Global Discovery (fifth). It’s hard to imagine the Positive Change fund’s popularity waning, with investors paying greater attention to ESG (environmental, social and governance) issues. Coupled with US President Joe Biden’s determination to re-join the Paris climate accord and the upcoming UN Climate Change Conference (COP 26) in Glasgow, the focus on climate change and sustainability are only likely to grow.
Two Vanguard funds, Vanguard LifeStrategy 60% Equity and Vanguard LifeStrategy 80% Equity, which arein eighth and seventh place, respectively, continue to be popular with our customers and they remain the only two passive options in our top 10 table. The two funds, along with Vanguard LifeStrategy 20% Equity, are three of our six quick-start funds, which we believe are a good choice for beginner investors. Analysts at interactive investor point out: “The range has a clear and well-defined investment process and has consistently produced strong risk-adjusted returns relative to peers.”
In addition, the Vanguard Life Strategy 60% Equity fund is one of interactive investor’s fund choices for the Financial Conduct Authority’s new Investment Pathways, which are available on our platform from today. The FCA initiative is designed to help pension savers entering drawdown.
Top 10 most popular funds: January 2021
| Rank | Fund | IA sector | Ranking change since previous month | 1-year return to 1 Feb (%) | 3-year return to 1 Feb (%) |
|---|---|---|---|---|---|
| 1 | Fundsmith Equity | Global | Up 1 | 11.5% | 45.8 |
| 2 | Baillie Gifford American | North America | Down 1 | 115.4% | 217.9% |
| 3 | Baillie Gifford Positive Change | Global | Same | 84.1% | 149.1% |
| 4 | Baillie Gifford China | China | Up 3 | 70.7% | _ |
| 5 | Baillie Gifford Global Discovery | Global | Same | 80.9% | 136.7% |
| 6 | Baillie Gifford Pacific | Asia Pacific Excluding Japan | Same | 66.1% | 76.5% |
| 7 | Vanguard LifeStrategy 80% Equity | Mixed investment 40%-85% shares | Down 3 | 5% | 19.3% |
| 8 | Vanguard LifeStrategy 60% Equity | Mixed investment 40%-85% shares | Same | 4.8% | 18.4% |
| 9 | Premier Miton UK Smaller Companies | UK Smaller Companies | New entry | 85.8% | 38.5% |
| 10 | Baillie Gifford Long-Term Global Growth | Global | Down 1 | 95.2% | 155.3% |
Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of January.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.