Retail investors have stuck by Neil Woodford in 2017 despite several multi-managers pulling money from the star fund manager.
The Woodford Equity Income fund was the second most popular with Bestinvest retail investors, although Fundsmith Equity was the “clear and decisive winner” when it came to inflows via the investment platform, says managing director Jason Hollands.
Managed by Terry Smith, another industry heavyweight with a strong track record, the fund’s success comes despite some calling time on the quality growth companies that it favours. However, Hollands notes the resurgence of value stocks and cyclicals failed to fully take hold and managers with a quality-growth style bias delivered another strong year.
Hollands says despite coming second overall for the year, Woodford Equity Income has slipped down the monthly inflows rankings as the fund fell to the bottom of the sector performance tables.
In the last month, Architas has removed the fund from their MA Active fund range, Jupiter pulled approximately £300m and Aviva ditched it from their workplace pensions platform.
Hollands says: “Woodford will surely be hoping for a turnaround in 2018 and is taking a contrarian view that is much more upbeat about the UK domestic economy than consensus opinion. He has also been warning about an overvaluation “bubble” in global stock markets centred on companies with dependable growth characteristics, the sorts of companies favoured by Terry Smith and the Nick Train, manager of the Lindsell Train Global Growth fund, another popular choice.”
Time will tell who is right, says Hollands. “It will be a fascinating showdown.”
Overall, Hollands says 2017 was a lucrative year for riskier sectors such as Asia, emerging markets, technology and smaller companies, while it was “dull” for bond and targeted absolute return funds.
He says equity dominated the most-bought funds with property, absolute return and bonds not making an appearance, however, defensive sectors have become more popular in recent months as investors grow concerned about a stock market correction.
Hollands reckons the economic outlook looks benign.
“We finish 2017 with the global economy in pretty decent shape, with markets having weathered both the various political uncertainties of the year and gradual shift in policy direction from central banks well, plus the prospect that the US will institute major tax cuts in the near year. And while undoubtedly parts of the market do look expensive compared to longer term trends, this is not a universal phenomenon by any means.”
In particular, Hollands says valuations on global emerging market shares trade below their longer-term trend despite strong returns this year, while unloved UK equities are also look broadly fair value.
Bestinvest most popular funds for retail investors 2017
- Fundsmith Equity
- Woodford Equity Income
- Stewart Investors Asia Pacific Leaders
- HSBC American Index
- Liontrust Special Situations
- Threadneedle European Select
- Lindsell Train Global Equity
- Threadneedle UK Equity Income
- Vanguard LifeStrategy 80%
- Vanguard LifeStrategy 100%