Interactive Investor

June's 10 most-bought funds

4th July 2014 13:47

Rebecca Jones from interactive investor

UK equities remain the most popular area for fund buyers as Unicorn UK Income and CF Woodford Equity Income takes podium positions and investors keep their faith in Invesco Perpetual's Mark Barnett.

Of the 10 most-bought funds on Interactive Investor in June, six are UK equity focused with the UK equity income sector remaining the most popular.

Top spot

Leading the pack is Money Observer Rated Fund Unicorn UK Income, which was the most-bought fund overall in June despite lead manager John McClure's death, which was announced on 9 June. This sees the fund regain the top spot for the second month this year after falling out of the table entirely in May.

The result is a heartening vote of confidence in the fund and joint co-managers Fraser Mackersie and Simon Moon, who worked closely with McClure on Unicorn UK Income. It also goes against recent poor performance which has seen the fund shed 3.31% over the past three months.

Record breaker

Neil Woodford's newly launched fund, CF Woodford Equity Income, was the second most popular UK equity income fund and the third most-bought fund overall. The fund raised a record breaking £1.6 billion during the initial offer period, which ran from 2 - 19 June, making it the largest UK investment launch on record.

However, despite ranking behind Unicorn UK Income in sales, CF Woodford Equity Income took 12 times more in terms of total value than the former. According to Rebecca O'Keefe, head of investment at Interactive Investor, this underlines the power of "brand Woodford".

"The sheer force of the Woodford brand and the considerable PR machine that went into operation in advance of his new fund launch guaranteed that thousands of investors switched money to be in at the start," she says.

However, the presence of both of Woodford's former funds, Money Observer Rated Fund Invesco Perpetual Income and Invesco Perpetual High Income, suggests that a number of investors are sticking with new manager Mark Barnett.

Having fallen out of the table in May, IP Income was the fourth most-bought fund overall in June while IP High Income was the eighth most bought, although this is down from second place in May.

However both funds have now being relegated to the UK all companies sector for failing to meet the IMA's three-year yield requirement following IP Income's rejection on 27 June. Morningstar has also downgraded both funds to a 'neutral' rating, citing concerns over further staff losses at Invesco as well as Barnett's ability to handle his new £20 billion mandate.

A new entry for 2014, Money Observer Rated Fund JOHCM UK Equity Income, was the sixth most-bought fund overall. Managed by James Lowen and Clive Beagles, the £2.7 billion fund is a top quartile performer over one, three and five years, returning 140% compared to 100% from the UK equity income sector during the latter period. Although the management group had previously stated a desire to stem infows into the fund, no specific barriers have been erected to discourage new investors.

Giles Hargreaves' Marlborough UK Micro Cap Growth - another Money Observer Rated Fund - was the only representative of the UK smaller companies sector. The fund was the 10th most bought overall in June, falling third place in both May and April.

Commenting on the dominance of UK equity funds, O'Keefe says: "The strength of sterling remains a compelling reason for investors to prefer UK funds over international alternatives, with sterling hitting multi-year highs against many currencies.

"In addition, as global equity markets continue to hit new highs there is a natural tendency for investors to reduce their interests overseas and increase their exposure to domestic markets, which is why we're seeing considerable demand for UK equities," she says.

Global picks

Away from the UK, Money Observer Rated Fund Newton Asian Income was the second bestselling fund overall, making it into the top 10 for the first time since April. Following a poor 2013, the fund has recently enjoyed a change in fortune, delivering a top quartile 6.2% year-to-date compared to 4.1% from its sector, IMA Asia Pacific excluding Japan.

Fixed income also enjoyed a resurgence, with two bond funds featuring in the top ten for the first time this year: Money Observer Rated Funds M&G Optimal Income - another new entrant for 2014 - and Invesco Perpetual Monthly Income Plus, which were the fifth and eighth most-bought funds respectively.

Over the past 12 months, M&G Optimal Income and IP Monthly Income Plus have returned 8.25% and 8.8% respectively compared to a return of 7.4% from their sector, IMA sterling strategic bond. However, year-to-date both funds have underperformed the sector by an average of 0.6%.

Another new entry for 2014, Money Observer Rated Fund Newton Global Higher Income, was the only global equity fund in the top 10. The seventh most-bought fund overall, the fund has underperformed the IMA global equity income sector over one, three and five years.

However, the fund tends to out-perform in down markets, such as in 2008 and 2011 when it beat both the sector and its benchmark, the FTSE World index.

Interactive Investor's 10 most-bought funds in June
RankFundIMA Sector
1Unicorn UK Income*UK Equity Income
2Newton Asian Income*Asia Pacific excluding Japan
3CF Woodford Equity IncomeUK Equity Income
4Invesco Perpetual Income*UK All Companies
5M&G Optimal Income*Sterling Strategic Bond
6JOHCM UK Equity Income*UK Equity Income
7Newton Global Higher Income*Global Equity Income
8Invesco Perpetual Monthly Income Plus*Sterling Strategic Bond
9Invesco Perpetual High IncomeUK All Companies
10Malborough UK Micro Cap Growth*UK Smaller Companies
*Denotes a Money Observer 2014 Rated Fund.