5 Most Popular Funds on Morningstar

What funds are you considering adding to your investment portfolio? According to Morningstar data it is a mix of high risk high reward biotech and UK equity income funds

Emma Wall 11 June, 2015 | 2:34PM
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Is your investment portfolio perfect? Or could you do with new addition to your fund family? Whether you’re picking potential funds for your pension, ISA or fantasy portfolio always consider the suitability of each product alongside existing investments.

Anyone savvy enough to have invested in 2011 will have turned £10,000 into £39,000

Take the most popular fund on Monringstar.co.uk over the last month for example. Axa Framlington Biotech may have delivered a whopping 45% in 2014, but this type of niche investment should only ever play a supporting role in a well-diversified portfolio. Its concentrated exposure can result in volatile returns – although anyone savvy enough to have invested in 2011 will have turned £10,000 into £39,000 today.

The fund is almost wholly invested in US-listed biotech stocks with the remaining 10% in European companies. Investors beware – there are loud rumblings about this sector being in a bubble, and those who have been lucky enough to benefit from the significant rally may wish to consider crystallising any gains.

The second most popular fund among Morningstar UK readers is Woodford Equity Income. This Bronze Rated fund has just reached its one year anniversary, and in the year since launch manager Neil Woodford has returned 18% to investors. Morningstar fund analyst Daniel Vaughan says that Woodford has proved himself willing to stick to his strategy even during periods of poor performance. As a result, his long-term track record, which encompasses numerous market cycles, is strong. 

Home-grown equities have proved popular over the past month with Morningstar readers, as Gold Rated fund Lindsell Train UK Equity is the third most popular fund. The fund is managed by Nick Train who selects companies from the bottom up and looks for unique and strong franchises that can prosper through a number of business cycles. Train has an exceptionally strong year in 2013, up 35% and has returned 12% year to date.

Another biotech fund rises to fourth place – with a similarly exciting past performance as the Axa Fram fund. Franklin Biotechnology Discovery is managed by Evan McCulloch who has been at the helm since November 2000 – and delivered an average return of 20% for the past decade. This figure is significantly boosted by recent returns however. The sector was flat from 2005 to 2011, when investors experienced non-existent gains post-fees.

The fifth most popular fund of the last month is Woodford’s former portfolio Invesco Perpetual High Income. Managed by Mark Barnett since Woodford’s exit early 2014, this fund holds a Neutral Rating, where previously it was rated Gold. Morningstar’s Richard Whitehall said that although analysts had a positive view of Barnett, bolstered by his strong track record in taking on the management of two of Woodford’s former funds, Barnett’s assets under management has increased by around £20 billion, and it is therefore questionable as to whether he will be able use his investment process as freely going forward as he has in the past. Barnett has delivered 11% to investors over the past year, compared to Woodford’s 18%.

 

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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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AXA Framlington Biotech R Acc221.11 GBP0.73Rating
Franklin Biotechnology Discv A(acc)USD31.85 USD1.44Rating
Invesco UK Eq High Inc UK Inc317.98 GBP-0.59Rating
LF Equity Income C Sterling Acc3.47 GBP0.00
LF Lindsell Train UK Equity Acc478.28 GBP-1.36Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar