By Jemma Jackson from interactive investor.
Passive and active managers jostle for space in last month’s list of favourite funds on the interactive investor platform.
interactive investor’s June platform purchases provide further evidence, were it needed, that active management has taken something of a knock in recent times – as well as demonstrating the unstoppable rise of Vanguard.
June’s top 10 open-ended fund buys saw passively constructed funds take up five of the top 10 spots, something that has only been achieved once before in the past year – in February 2019.
The five funds in question are all from Vanguard, with three coming from the firm’s popular LifeStrategy range. Despite this, two very familiar active fund names – Fundsmith Equity and Lindsell Train Global Equity, continue to take first and second place, with LF Lindsell Train UK Equity not far behind in fourth place.
Rebecca O’Keeffe, Head of Investment, interactive investor, says: “Star fund managers become ‘stars’ because they have built up a formidable track record of outperformance, which sets them apart from the rest of the pack. This is hugely attractive to potential investors and there is nothing wrong with that, especially as it can be difficult to find the right investments to buy. The key is to make sure that the investment you chose meets your objectives when you buy it and continues to deliver over time.
“Recent events have put the whole active versus passive debate back in the spotlight. There are undoubtedly huge positives to low-cost trackers and they are steadily gaining in popularity in the UK.
“In the US, most new money already flows into passive investments. However, that doesn’t mean that there is no place for active managers. The ability for an active manager to invest where, when and in what they like is exactly what some investors want. It undoubtedly increases the risks, but the reward is often worth paying extra fees for.
“While it is too early to tell if the passive/active debate will continue to play out in the ‘top buy’ tables, June’s data is a timely reminder that everyone needs to pay attention to their holdings, especially actively managed ones. Low-cost trackers have the advantage that you can largely shut your eyes when you invest and accept the index return – positive or negative, but the same is not true of active investments, which need much closer scrutiny.”
Moira O’Neill, Head of Personal Finance, interactive investor, adds: “Whilst Vanguard funds are a world away from Fundsmith and Lindsell Train, what they do have in common is a clear, well defined strategy, and they stick to their knitting. This is clearly part of their very strong appeal.
“There’s another reason why Vanguard are doing so well, and it isn’t just about cost – the LifeStrategy funds are giving active managers a run for their money on both performance and cost grounds.
“It’s interesting to see BlackRock have arguably risen to the Vanguard challenge with the recent launch of the MyMap range, with an ongoing charge of 0.17% compared to 0.22% for the LifeStrategy Funds. It will be interesting to see whether these new funds manage to capture investors’ imagination.”
10 most-bought funds June 2019
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. 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.