In 2022, investors withdrew vast amounts of cash from investment funds. A total of £25.7bn was withdrawn from retail funds in 2022, making it the worst year for outflows on record. That’s according to trade body The Investment Association.
Association chief executive Chris Cummings notes that “UK retail investors faced a challenging year in 2022” due to soaring inflation, the cost-of-living crisis, and falling returns from stocks and bonds.
But he suggests that interest in investment funds could be about to turn higher. He adds that “there are glimmers of hope that investor confidence will increase in the first quarter of 2023” given recent stock market gains and an improving outlook on bond markets.
Two investment funds I’d buy
The global economy isn’t out of the woods yet and retail investment funds could witness more heavy outflows. Yet I for one plan to invest in the retail fund space this year. From a long-term perspective there are many investment funds I think could deliver spectacular investor returns.
I don’t have limitless reserves of cash I can use to build my investment portfolio. But here are two I’ll be looking to buy if I have money to spare.
#1: iShares Global Clean Energy ETF
The green economy offers exceptional investment potential in the coming decades. The iShares Global Clean Energy ETF is an instrument that provides broad exposure to the lucrative realm of energy transition.
This exchange-traded fund (ETF) has around $6.1bn invested in 97 companies. These include solar panel component builder Enphase Energy, wind turbine manufacturer Vestas, and a cluster of renewable energy producers.
The Investment Association says that responsible retail funds like this witnessed inflows of £5.4bn in 2022. This group was, along with tracker funds, the only one to record inflows last year.
I expect demand for ESG investments to continue rising strongly as action to tackle the climate emergency heats up. I’m conscious, however, that returns might disappoint if a prolonged period of unfavourable weather damages green energy production.
#2: FTF Martin Currie UK Rising Dividends
I’ve decided to prioritise dividend investing again in 2023. This may be the best way for me to make a positive annual return as the tough economic backdrop could limit capital appreciation.
FTF Martin Currie UK Rising Dividends is an investment fund I’m considering buying to bolster my passive income. As its name implies, this financial vehicle invests in stocks that aim to grow shareholder payouts.
The fund has invested £155m in 45 UK shares including FTSE 100 heavyweights Legal & General, AstraZeneca, and National Grid. It also holds shares in companies outside London’s flagship index.
I think The Martin Currie UK Rising Dividends fund is a top buy given the quality of the companies in its portfolio. But one thing to keep in mind is that it only invests in British stocks. As a consequence, it lacks the geographic diversity that can reduce investor risk.
