UK equity funds prove popular with investors

1st September 2014

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UK equity funds have proved the most popular with clients since the launch of New Isas (NISAs) in July, according to Tilney Bestinvest.

Since the new Isa limit of £15,000 came into force, £1.9 billion of investors cash poured into UK funds, the Investment Management Association reported.

The trade body found that UK equity income was the most popular sector, followed by property funds and sterling strategic bond funds.

However, Tilney Bestinvest, the adviser, found that the UK All Companies sector drew the highest  proportion of inflows from clients managing their own investments via its Online Investment Service, followed by UK equity income funds.

The adviser also picked up on other trends among investors, such as the growing appeal of flexible bond funds.

Jason Hollands, managing director of Tilney Bestinvest, says: “With interest rates currently at a record low but expected to rise over the coming year, we have long signalled the prospect of future adjustments in the bond markets that could mean higher yields but lower bond prices are to come.

“For some time we have highlighted the merits of strategic bond funds, those which have a significant degree of flexibility to adapt to changes.”

Hollands says targeted absolute return funds also gained traction among clients taking a more defensive approach in light of  the crises in Ukraine and the Middle East.

However, he warns that, although these funds seek to deliver positive returns across market conditions, these investments vary significantly in terms of risk and volatility and returns are not guaranteed.

There are signs that, after a tough year in 2013, Asia Pacific excluding Japan and Global Emerging Market funds are once again starting to attract the attention of investors.

Hollands says that First State Asia Pacific Leaders and Lazard Emerging Markets were the most popular within each of those sectors respectively.

In Europe the prospect of Quantitative Easing has not escaped the notice of investors, he adds: “Although the economic headlines surrounding the Eurozone have been increasingly dire, with growth stalling, inflation worryingly low and a political crisis bubbling away in France, European equity funds continued to attract new inflows from clients  as expectations have grown that the European Central Bank will introduce major stimulus measures.”

For those looking to gain exposure to the US, tracker funds have proved the most appealing vehicle, says Hollands.

“US equities have presented a dilemma for investors this year. After a setback in the first quarter, the economic recovery appears to have got back on track and the US stock market has proved buoyant, with the S&P 500 Index reaching a record high. Yet US equities look expensive,” he says.

 

The ten most popular individual funds among Tilney Bestinvest clients were:

1. Standard Life Investments Global  Absolute Return Strategies

2. Threadneedle UK Equity Income

3. Kames Strategic Bond

4. Liontrust Special Situations

5. HSBC American Index

6. Henderson UK Property

7. M&G Optimal Income

8. Axa Framlington UK Select Opportunities

9. CF Woodford Equity Income

10. Henderson Strategic Bond

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