Top 10
Top 10 - a review of the Top 10 most popular funds on Cofunds
Data obtained from our Fund Supermarket provider Cofunds shows that the dual desires for income and a wish to participate in the historic shift of global economic power from West to East remains amongst Chartwell clients. Over recent years we have observed both the continued prevalence of income producing funds and emerging markets, specialist equity or commodity related strategies when reviewing the most popular funds selected via our Fund Supermarket. So what features in the Top 10 today?
Woodford's wonderful resilience
We all know that confidence is an important aspect to the success of financial markets; but it appears that for Chartwell client's faith in the fund management skills of INVESO Perpetual's perpetual golden boy Neil Woodford remain undiminished - despite a lacklustre year relative to the equity markets - as he is involved in the fund management of 3 of the top 10 funds. The INVESCO Perpetual High Income (1), INVESCO Perpetual Monthly Income Plus (2) and INVESCO Perpetual Income (9) all feature in the Top 10 (as indeed they usually do).
Woodford's preference for companies that pay a reliable dividend, albeit at the expense of short term spectacular growth has meant that he has lagged the FTSE 100 Index and the IMA UK Equity Income & Growth Sector. He continues to favour more defensive stocks, like utilities and tobacco giants. With the outlook for global economic growth looking more shaky we believe that Woodford's INVESCO Perpetual Funds begin to look better relative to the peer group.
Go East!
It's a well worn story in the media now and the rise and rapid development of the Far East and emerging markets needs little introduction. The First State Asia Pacific Leaders (3), Aberdeen Emerging Markets (5) and M&G Global Basics (10) Funds are perhaps some of the most consistent long term performing funds that tap into the globalisation theme. Like Neil Woodford, all three funds have stable and consistent fund management teams.
Both the First State Asia Pacific Leaders Fund, managed by Angus Tulloch, and the Aberdeen Emerging Markets Fund, co-operatively managed by their Global Emerging Markets Team, have a comparable approach to stock selection in that they both favour larger companies with more established cash flows. Neither are what you would describe as speculative funds, looking to exploit a ‘once in a life time' opportunity.
The M&G Global Basics Fund, managed by Graham French, also has a much more mainstream approach to accessing commodity, demographic change and globalisation themes. Rather than buying into the obvious mining and commodity stocks (although the fund will and does), French has recently been favouring developed market companies like toothpaste and cosmetic manufacturers in order to benefit from an accelerated growth in demand from emerging markets. Even the UK focused M&G Recovery (6), managed by Graham French's friend and colleague Tom Dobell looks for UK companies with significant emerging market exposure.
Incoming!
As well as the old faithful income funds of Neil Woodford and Artemis Income (7), we're also seeing a greater appetite for two newer types of income producing fund.
The Newton Global Higher Income (4), managed by James Harries, seeks to generate a rising dividend yield from a portfolio of global stocks. With the UK equity income sector so dependent on relatively few sectors of the economy to generate yield (banks, petroleum and telecoms), widening your dividend base to include overseas companies makes sense. Having been one of the first global equity income funds to launch the fund is now one of the more successful funds in a rapidly growing sector.
Meanwhile the Schroder Income Maximiser (8) aims to tackle the low dividend problem from a different angle. It uses a derivate strategy to enhance the yield the fund generates. Put simply the fund managers sell options written on a particular stock and use the premiums to enhance the yield paid by the fund. While there are drawbacks to this strategy, in times of low stock market volatility the approach is particularly effective as the cost of operating it is low.
More information about these funds.