It's wise to keep in mind that users of Morningstar.co.uk search for funds not only when they’re considering an investment, but also when they’re concerned and are considering selling share classes.
As such, while several of the usual suspects dominate the list of most-searched-for funds on Morningstar.co.uk in the second quarter, some are notable for their emerging market debt exposure—an asset class that is widely considered to be overvalued at present and has therefore had investors running for the doors. The Templeton Global Total Return fund, with top holdings in government debt from countries including Korea, Uruguay, Iceland, Mexico and Romania, is one such example.
The accumulation share class of Templeton Global Total Return was the most searched for on Morningstar.co.uk in the latest quarter, while the monthly distribution share class of the same fund—which appeals to investors seeking regular income as it distributes its dividend on a more regular basis than the fund’s other share classes—came in seventh on the list.
A new addition to the top ten in the second quarter was Legg Mason Japan Equity, which landed in third place as investors sought out exposure to the world's best performing region in the first half of 2013, Japanese equities. The arrival of a new government last year and of a new governor of the Bank of Japan in early 2013, has created something of a revolution. After decades of lacklustre performance, very aggressive fiscal and monetary policy—dubbed 'Abenomics' after Prime Minister Shinzo Abe—has raised hopes that the Japanese economy will be successfully reflated. And with those hopes comes stock market performance: the Nikkei 225 rose 10% in the second quarter; were it not for the correction seen since late May, the leading Japanese index would have also recorded gains in excess of 50% for the first half of the year.
After the first two legs of Abe's growth plan—loose monetary policy and expansionary fiscal policy, i.e. government spending—the next key test for a continued rise in the Japanese market will be the third leg of the plan, that of structural reform of the economy.
Notable by their absence from the top ten list compared to the previous quarter are M&G Strategic Corporate Bond and JP Morgan Natural Resources (rated Gold and Bronze by Morningstar OBSR, respectively). Morningstar data reveal the Commodities – Precious Metals category as one of the most sold Morningstar categories across Europe in 2013, with more than EUR 5 billion being pulled from the category in the five months to end-May, second only to UK Large-Cap Blend Equity.
Outflows from commodity-related funds are not surprising given the sharp fall in major commodity prices in the first six months of the year. Gold has slumped 27%, silver has plummeted 36%, coffee has been ground down by 21% and nickel is 20% weaker. In recent meetings with fund managers, Morningstar OBSR analyst Oli Kettlewell says he has heard an increasing number of managers refer to the so-termed "end of the commodities super cycle," which could result in structurally lower commodity prices for an extended period leading to lower share prices for commodity-related companies.
Meanwhile, the EUR 2.7 billion diverted away from GBP Corporate Bond in that time period goes part way to explaining the omission of M&G Strategic Corporate Bond from the second-quarter list.
Of the top ten, six are rated Gold by Morningstar OBSR analysts, while one is Silver and two are Bronze.
10 Most Searched for Funds in Q2
Templeton Global Total Return A Acc $
Rated Bronze
Aberdeen Emerging Markets A AccRated Gold
Legg Mason Japan Equity A Acc
Not rated
First State Global Emerging Markets Leaders A Acc GBPRated Gold
Invesco Perpetual High Income AccRated Gold
Newton Asian Income IncRated Silver
Templeton Global Total Return A MDis $Rated Bronze
First State China Growth I Acc USDRated Gold
BlackRock Global Funds - World Mining A2Rated Gold
Aberdeen Asia Pacific A AccRated Gold
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