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Top 5 Funds on Morningstar

Which are the most popular funds according to Morningstar readers? Our top 5 list shows a bias towards home-grown stocks, and healthcare funds

Karen Kwok 25 February, 2016 | 10:46AM
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Amid a background of market volatility investors appear to be playing it safe. Equity income and Absolute Return funds feature prominently in the December list of the five most popular funds on Morningstar.co.uk. However, some more gung-ho investors were still keen on higher risk biotech funds.

Still top of the pops with Morningstar readers is Bronze-Rated fund CF Woodford Equity Income.  The fund has been at top of this list since June last year.

 Morningstar analyst Daniel Vaughan says the fund manager, Neil  Woodford, has delivered outstanding long-term returns. He has proved willing to stick to his strategy even during periods of poor performance and as a result has a long-term track record that encompasses numerous market cycles.

The biggest holding is the fund is Imperial Brands (IMB). Two mega-cap pharma stocks, AstraZeneca (AZN) and GlaxoSmithKline (GSK) are also significant holdings.  These stocks have helped the fund deliver strong relative returns in 2015.

However, the fund also holds a number of smaller cap stocks, including  unquoted names such as Stratfield Medical and Purplebricks. The fund invests primarily in UK listed companies. It also invests in unlisted companies and overseas entities. Its charge was fixed at 1%.

The second most popular fund of December was AXA Framlington Biotech Fund. The fund might have lost 18.6% year to date, but it has a 25% annualised return over three years. This fund seeks to provide long-term capital appreciation by investing principally in companies in the biotechnology, genomic and medical research industries worldwide. It invests primarily in US stocks. The fund charges at 1.82%, with Gilead Sciences (GILD) the largest component of the fund.

Another UK equity income fund sits in third place: Invesco Perpetual High Income. This is Woodford’s former fund, but has been managed by Mark Barnett since March 2014.

Morningstar analysts have moved the fund’s rating from Neutral to Bronze as they see evidence of the team being rebuilt after Woodford’s departure, and of Barnett’s ability to step up and manage a fund of this size.

However, this remains a relatively expensive fund. The ongoing charge of the retail share class is 1.67%. This is 10 basis points above the average in the UK equity-income Morningstar Category, according to Morningstar analyst Daniel Vaughan.

Given the turbulent markets it is perhaps not surprising to see a multi-strategy fund in this list. The fourth most popular fund is Standard Life’s Global Absolute Return Strategies (GARS). This Bronze Rated fund has one of the most successful track records within the absolute return peer group, according to Morningstar analyst Randal Goldsmith.

The fund was launched in May 2008 and since then it has generated a solid return, outperforming its Libor benchmark by delivering an annualised return of 6.5% to investors through the end of Jan 2015, Goldsmith says. It has a well-resourced multi-asset investing team of 44, headed by Guy Stern. The fund charges at 0.84%, which is below the peer group median.

In the fifth slot is another equity income fund, offering exposure to a range of sectors and countries. Schroder International Selection Fund Global Dividend Maximiser has a global rather than UK focus. The fund looks fairly well-balanced from a stock perspective, with top sector exposures including financial services (28%), technology (20%), consumer cyclical (13%), consumer defensive (10%) and industrials (7%). The fund’s objective is to provide income and capital growth primarily through investment in equities or equity-related securities worldwide. The fund will also selectively enter into option contracts to generate additional income. The fund charges at 1.92%.

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
ASI Global Absolute Ret Strat R Acc78.77 GBP0.87Rating
AstraZeneca PLC8,363.00 GBP0.00Rating
AXA Framlington Biotech GBP Z Acc466.80 GBP0.17Rating
Gilead Sciences Inc69.65 USD0.00Rating
GlaxoSmithKline PLC1,554.80 GBP0.00Rating
Imperial Brands PLC1,573.00 GBP0.00Rating
Invesco UK Eq High Inc UK Acc749.22 GBP1.59Rating
LF Equity Income A Sterling Acc3.35 GBP0.00
Schroder ISF Glb Div Mxmsr A Dis Q4.39 USD1.34Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk