With three months left to utilise this tax year’s ISA and SIPP allowances, it may be worth considering the top 10 most purchased funds by UK investors on the Interactive Investor platform in December 2021.
The outlook for equity markets in 2022 is uncertain, with concerns over rising inflation, the tightening of monetary policy in the U.S. and the economic cost of the pandemic. Funds represent a good way of managing risk by allowing investors to purchase a ready-made portfolio of assets picked by experts, with a wide choice of sectors and asset classes.
What do I need to know about investing in funds?
Funds are a way of pooling investors’ money to be invested in a range of shares, bonds and other assets by the fund manager. Funds are forward-priced i.e. you place an order without knowing the unit price at which it will execute, unlike investment trusts or shares.
It pays to monitor the fees charged for buying and holding funds. Investment platforms such as Hargreaves Lansdown typically do not charge an initial fee, although you will pay an annual fee to the investment platform for holding funds. Fund managers also charge an annual management fee, measured by the Ongoing Charge Figure (OCF); passive funds, (which aim to track an index) typically have a lower fee than active funds (which aim to outperform the market by stock-picking).
Top 10 funds purchased in December 2021 by UK investors
Fundsmith Equity (Global, OCF 0.95%)
A perennial favourite over the last decade, Fundsmith Equity boasts a 10-year return of 483%, over double the return of 221% for the IA Global sector and currently has 73% invested in the U.S. According to Morningstar, the fund was a top-quartile performer against its peers in 2021, with a return of 22.2%.
Vanguard LifeStrategy 80% Equity (Mixed Investment 40%-85% shares, OCF 0.22%)
This is one of three Vanguard LifeStrategy funds in the top 10 funds, being “funds of index funds.” This fund has been a consistent top-quartile performer over the last five years, according to Trustnet, achieving an annual return of 14.4% in 2021, relative to 10.9% for the sector, with 39% invested in North American equities.
L&G Global Technology Index (Technology & Telecommunications, OCF 0.32%)
A passive fund that aims to track I.T. companies in the FTSE World Index, achieving a top-quartile return of 35.0% in 2021, 3.9% above its index (according to Morningstar). 80% of the fund is invested in the U.S., with Apple, Microsoft and Alphabet comprising the top three holdings.
Baillie Gifford Positive Change (Global, OCF 0.53%)
This fund invests in companies that can deliver positive change and solutions to global challenges, with the top three holdings being ASML (semi-conductor equipment manufacturer), Moderna (medical) and Tesla (automotive). According to Trustnet, the fund had a particularly strong 2020, achieving a return of 80.1% compared to 15.3% for the IA Global sector. However, it had a relatively disappointing return of 10.8% in 2021, falling to the third quartile against its peers.
Vanguard LifeStrategy 60% Equity (Mixed Investment 40%-85% shares, OCF 0.22%)
This fund invests 40% in bonds and other fixed income instruments. It has consistently delivered a similar return to its sector over the last five years, according to Trustnet, with a return of 9.9% in 2021 compared to 10.9% for the sector.
Rathbone Global Opportunities (Global, OCF 0.77%)
Rathbone Global Opportunities is another fund that has delivered strong returns of 117.2% over five years, compared to 66.8% for the IA Global sector, according to Trustnet, making it one of the top funds in its sector. Returns were 20.1% in 2021 and it has a large-cap focus, with around two-thirds of the fund invested in the U.S.
Vanguard U.S. Equity Index (North America, OCF 0.10%)
A passive fund that aims to track the S&P Total Market Index, this fund had a strong 2021, delivering a 26.5% return and a three-year return of 74.4%, according to Trustnet. Its largest holdings are Apple, Microsoft, Alphabet and Amazon.
Vanguard LifeStrategy 100% Equity (Global, OCF 0.22%)
This fund also invests in other Vanguard passive funds; according to Trustnet, it delivered a 19.2% return in 2021, compared to 17.7% for the IA Global sector.
Baillie Gifford American (North America, OCF 0.51%)
Baillie Gifford American had a stellar 2020, returning 121.8% compared to 16.2% for the IA North America sector, according to Trustnet. However, its fortunes reversed in 2021, with a negative return of 2.8% compared to a 25.5% gain for the sector.
Vanguard FTSE Global All Cap Index (Global, OCF 0.23%)
This passive fund aims to track the performance of the FTSE Global All Cap Index, with a 18.9% return in 2021. Almost 60% of the fund is invested in U.S. equities, including Apple, Microsoft, Alphabet and Amazon.
All OCFs are based on the relevant unit type from the top 10 funds purchased from Interactive Investor