24th September 2014 at 8:58am
Where are other people investing?
Of all the investment questions I hear, one of the most common is: where are other people investing? At Standard Life, our investment analysts have access to a plethora of data, and create charts and graphs on a wide range of fascinating investment trends. So, can the data they’ve collected help to answer: what are the most popular sectors and funds?
Market views – what investors are expected to do
Standard Life works closely with a number of fund management groups – and most have a view on what they expect to happen in the various markets.
Overall, they predict an environment where investors are happy to take on more risk than they have been in recent years. As a result, the outlook for equities is generally positive – in particular from developed economies – so European, Japanese, US and UK equities are expected to do well.
As a flip side to this increased appetite for risk, the prediction for bonds is generally negative. Bonds were viewed as something of a safe haven during the financial crisis, and as such were bought heavily. With demand falling back, fund groups seem to see little value in them now. Their views are particularly negative on bonds issued by developed governments. They’re more cautiously positive on corporate bonds and emerging market debt, though still not strongly so. This also ties in with an increased appetite for risk – developed government debt is, generally speaking, the least risky form of bond investment.
Most of the fund groups don’t provide a view on property, but those that do are positive across the board. This is a sharp turnaround from five years ago, when confidence in the sector was at an all-time low.
So that’s how some fund groups expect the key asset classes to perform – but does it tie in with what investors are doing?
Sought after sectors
The Investment Management Association (IMA) categorise funds into ‘sectors’, to allow funds that are alike to be compared to each other. We’ve looked at the net flows* into each sector on our own platform, and you can see sectors that are most popular by this measure in the table.
In third place is the UK Equity Income Sector. We’d always expect equity to be a common choice of asset class, and its no surprise that equity income is towards the top. Some investors are looking for an income, but others believe that income stocks are less risky, or are more likely to give better returns overall. It’s one of the most popular types of fund for many years.
The second highest net flows belong to the Property Sector. This is something of a turnaround for the asset class, and its increase in popularity this year so far reflects the positive outlooks of the fund groups. The financial crisis hit this asset class hard, so it’s encouraging to see renewed demand for what’s an excellent diversifier and income generator.
The most popular sector is the Unclassified. This sector has 14.5% of net flows, and includes all funds which shouldn’t, or don’t want to be compared to other funds. Typically funds with very specific objectives will find their way into here, like ‘risk based funds’ that are managed to risk levels rather than traditional index benchmarks. For instance, it includes all the funds in our MyFolio range.
We’ve looked at the most popular sectors, but what about individual funds? For this, I’ve again looked at the net flows on our main platform, and the results aren’t hugely surprising given the top sectors.
The top funds clearly show certain areas that are appealing to investors, and these largely match our sector findings above. Of the top ten funds, three are property and four are equity. Of the equity funds, three were Equity Income funds – two UK and one Global. Notably, there are no bond funds in the top ten – the most popular bond fund, the Jupiter Strategic Bond Fund, is only 17th most popular.
Our most popular fund over the year to date has been the M&G Feeder of Property Portfolio, which invests in the M&G Property Portfolio. The Henderson UK Property Fund comes in third, and the Standard Life Investments UK Property Accumulation Feeder Trust was also in the top 10. The popularity of funds in the Property sector reflects what we see in both our market views and our sector analysis.
The equity income fund with the highest net flows was the Artemis Global Income Fund, with the Standard Life Investments UK Equity Income Unconstrained Fund and the Threadneedle UK Equity Income Fund also common choices. These results emphasise the findings of our sector results – Equity Income generally has higher net flows than normal Equity funds.
Two of the top ten most popular funds are from the Standard Life Investments MyFolio range, with one fund having the second highest net flow of all the funds on our platform.
We hope to write more about popular funds and sectors in future. We’re keen to write about the things you want to read about, so if there’s information here you’ve found useful or that you haven’t found useful, or things you’d like to read more about, let us know in the comments.
A final important word of warning
Just because a lot of people are investing in a particular way doesn’t necessarily mean it’s the right way to invest. The majority can easily be wrong – evident during the credit crunch when it was proved that property values can and do fall. The information I’ve given is for interest and none of it should be taken as recommendations.
* ‘Net flows’ means the difference between total money into a fund or sector, and total money out of it. Net flows are a good indicator of how popular the fund or sector has been.