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The Most Coveted Funds of 2012

Morningstar highlights the seven most highly sought after funds from the first nine months of 2012

Alanna Petroff 7 November, 2012 | 6:01AM

If you’re on the lookout for new investments, you may want to ‘follow the money’ and check out where other investors are funnelling their cash. According to the latest Morningstar data, seven funds have pulled in more than £1 billion each in net investments in the first three quarters of 2012.

The most highly coveted fund of 2012 is the M&G Optimal Income Fund (Analyst Research). As of 30 September 2012, the Silver-rated fund, which is run by the highly regarded Richard Woolnough, took in a net £3.3 billion. The behemoth fund is considered by Morningstar OBSR analysts to be a suitable choice for investors who are looking for unconstrained fixed-income exposure with a modest equity stake. The analysts also have a high regard for Woolnough, saying that he is “one of the more experienced fixed-income managers in the industry.”  

The Bronze-rated Standard Life Global Absolute Return Strategy Fund (which is also called the GARS fund) comes in second place in terms of net asset flows. Investors pushed roughly £3.1 billion at this fund’s management team in the first three quarters of 2012. This fund in particular has been highly sought after by institutional investors, especially pension funds.

This fund’s rating had recently been under review due to some significant changes that had taken place on the fund’s management team. But Morningstar OBSR analysts recently upgraded the fund to Bronze from Under Review, stating: "We are now reassured that the team, under the continued leadership of Euan Munro and Guy Stern, remain focused on the successful management of the fund ... They have taken positive steps to strengthen the team who manage the GARS fund."

The Silver-rated M&G Global Dividend Fund (Analyst Researchwas the third most popular fund in terms of net asset flows in the first nine months of 2012, with a net £1.75 billion being funnelled into the fund. This fund has a large-cap bias and is run by Stuart Rhodes, who is “building his reputation as one of the top global equity managers,” said Morningstar OBSR analyst, Oliver Kettlewell.

Four other funds absorbed between £1 to £1.5 billion in new investment money in the first nine months of this year. They are:

Federated Prime Rate Sterling Liquidity Fund 
(This fund is generally only available for institutional investors and not individuals.)

Baillie Gifford Diversified Growth Fund

Newton Asian Income Fund (Analyst Research(Rating: Silver)

Newton Real Return Fund (Analyst Research(Rating: Bronze)

These seven funds present investors with an eclectic mix of options. On the one hand, the M&G Optimal Income fund demonstrates the continued appeal of M&G’s fixed income portfolios. Meanwhile, the Newton Asian Income fund appeals to investors since it gives them access to Asian equities.

Morningstar’s asset flow information for open-end funds is calculated on a monthly basis. The cash flow estimate for each month is simply the difference between the beginning and ending total net assets in each fund that cannot be explained by the monthly total return and the dividend payout. Data are provided by the fund management firms to Morningstar.

  Fund Name Net Asset Flows (Billion)
1. M&G Optimal Income Fund
 £3.30
2. Standard Life Global Absolute Return Strategy Fund  £3.07
3. M&G Global Dividend Fund  £1.75
4. Federated Prime Rate Sterling Liquidity Fund  £1.49
5. Baillie Gifford Diversified Growth Fund  £1.25
6. Newton Asian Income Fund  £1.01
7. Newton Real Return Fund  £1.01

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.