September's 10 most-bought funds

Half of the top ten most-bought funds on Interactive Investor in September were index-tracking funds from passive specialist Vanguard. This is a record for passive funds on the site, as investors have seemingly turned to low-cost vehicles to take advantage of August's sell-offs.

Vanguard's multi-asset LifeStrategy range proved a particular hit with investors in September, with Vanguard LifeStrategy 80% Equities, Vanguard LifeStrategy 100% Equities and Vanguard LifeStrategy 60% Equities the second, third and sixth most-bought funds respectively.

The LifeStrategy funds invest in other Vanguard tracker funds across a number of regions and asset classes, with the percentage figure relating to their total equity exposure. They have ongoing charges figures (OCFs) of just 0.24%.

Also ranking within the top ten are Vanguard FTSE UK All Share Index and Vanguard FTSE Developed World ex UK Equity Index, which were the fifth and seventh most-bought funds last month and have even lower OCFs of just 0.08% and 0.15% respectively.

Commenting on the popularity of tracker funds, Rebecca O'Keeffe, head of investment at Interactive Investor, says: "The market is experiencing a real shift towards passive investing and competition between passive providers means that investors have more choice at a lower price than ever before.

"However, investors should be wary of using either active or passive funds exclusively. Passive funds have a real part of play in bull markets; however, as you move into a different stage of the economic cycle and markets become more volatile, then active management may have a greater role to play."

Active stars

In the active management space CF Woodford Equity Income was the most-bought fund in September for the 15th consecutive month. The fund has held onto the top spot since its launch last June, during which time it has grown from £1.6 billion to over £7 billion. The fund is now the largest in the Investment Association's UK equity income sector, having just surpassed Artemis Income (£6.8 billion).

Money Observer Rated Funds AXA Framlington Biotech, Fundsmith Equity and Artemis Global Income were the fourth, eighth and ninth most-bought funds last month respectively, with all three falling significantly down the table compared to August.

Making its debut in the top ten is City Financial Absolute Equity, which was the tenth most-bought fund in September after it managed to return more than 7% in August compared to a loss of between 5 and 7% across most global equity indices. It is also the only fund in the most-bought table to make a positive return in September (3.5% compared to an average loss of 0.2% from its sector).

Managed by David Crawford since its inception in 2008, the £162.6 million fund employs a long/short strategy, which means it uses derivatives to bet against or "short" stocks or indices as well as investing in them. While this has clearly paid off recently, it remains a high-risk strategy and arguably one for the adventurous investor.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. 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.