ISA and SIPP Investors' Favourite Funds

Where are investors allocating their ISA and SIPP allowances? There is just one day to go until the end of the 2016/17 tax year

Karen Kwok 4 April, 2017 | 3:12PM
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This week marks the end of one tax year, and the beginning of the new 2017/18 tax year. For investment ideas, back to basics education and advice from the experts read Morningstar’s Guide to Planning for Retirement.

Where are investors allocating their ISA and SIPP allowances? There is just one day to go until the end of the 2016/17 tax year and, according to data compiled by Morningstar.co.uk and fund platforms, investors are favouring UK equity and targeted return funds.

In March, the Silver Rated CF Woodford Equity Income fund and the Gold Rated CF Lindsell Train UK Equity fund both topped the most hits list on Morningstar.co.uk. These two funds were also featured in the 10 most purchased funds by ISA and SIPP investors in March through fund supermarket Hargreaves Lansdown.

These two fund managers have proved to investors their ability to deliver sustainable gains. Woodford Equity Income is managed by Neil Woodford, who has one of the longest track records in the equity income sector, said Peter Brunt, senior fund analyst with Morningstar. Lindsell Train UK Equity benefits from the stewardship of a seasoned and talented UK equity manager, Nick Train, who has demonstrated a consistent approach, said Simon Dorricott, senior fund analyst with Morningstar.

The newly launched CF Woodford Income Focus fund has also proved popular among investors, being one of the top 10 purchased funds in March, according to Hargreaves Lansdown.

“It comes as no surprise that Neil Woodford’s new Income Focus fund has proved popular with investors; a portfolio with a high yield run by one of the UK’s most successful funds managers is a powerful combination,” said Laith Khalaf, senior analyst with Hargreaves Lansdown.

Most Bought Funds in February: Targeted Return

In February – as the ISA season was beginning – investors rushed to snap up targeted return funds, data from Morningstar Direct revealed.

In February alone, the Aviva Investors Multi-Strategy Targeted Return fund saw a £764 million inflow, the biggest monthly inflow the fund has seen since its launch in July 2014. The fund holds a Neutral rating from Morningstar analysts.

This fund's flexible asset- and strategy-allocation approach targets cash plus 5% over three years rolling with less than half the volatility of equities, said Randal Goldsmith, fund analyst with Morningstar.

Goldsmith said from launch at the beginning of July 2014 to the end of January 2016, the fund has returned an annualised 7.3%, which is on course to meet its target when it reaches three years. At this stage, it is too early for analysts to have full conviction, but the strong start and firm-wide support for the strategy bodes well, Goldsmith added.

Two other top rated targeted return funds, Bronze Rated Invesco Perpetual Global Targeted Returns fund and the Silver Rated Newton Real Return fund recorded £220 million and £153 million inflows in February respectively.

Jupiter India and Fundsmith Equity

Data from Morningstar and Hargreaves Lansdown reveal a similar story regarding the most favoured funds among investors during the run up to the end of the tax year.

Last month was the first time the Bronze Rated Jupiter India fund appeared on the most clicked on list by Morningstar.co.uk readers. This fund was also one of the top 10 most bought funds on Hargreaves Lansdown in March. This fund gained 21.9% in 2016, according to Morningstar data. The fund has 31.8% three-year annualised return and 16.6% five-year annualised return.

Lena Tsymbaluk, fund analyst with Morningstar agreed, says the fund continues to benefit from the fund manager Avinash Vazirani, who has 20 years of experience covering Indian equities, and a proven process which has led to an admirable performance profile over the long term. 

The Bronze Rated Fundsmith Equity fund and Lindsell Train Global Equity also proved popular, both appearing on the top hits on Morningstar.co.uk and the top 10 bought funds on Hargreaves Lansdown in March.

Thematic fund AXA Framlington Biotech was third on March’s top hits list on Morningstar.co.uk. Vanguard LifeStrategy 100% Equity and the Gold Rated BlackRock Gold and General fund came ninth and tenth on the most popular hit list among Morningstar.co.uk readers.

Other funds featured in the top 10 most bought funds list by Hargreaves Lansdown SIPP and ISA investors are CRUX European Special Situations, Gold Rated Legal & General US Index, Newton Global Income and Silver Rated Steward Investors Asia Pacific Leaders

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

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk