World stocks hit record high last week. The three major stock indices in the US all posted record closes on Thursday; The S&P 500 and Dow Jones are now up more than 6% year to date at 2,430 and 21,144 respectively, while NASDAQ is up 15% year to date at 6,246. On Friday the UK main stock index FTSE 100 also rose 0.4% to a new record high, and 5.5% year to date. The MSCI Emerging Market, an index of 23 emerging markets countries in the world, rose 17.6% year to date.
Reflecting these global gains the top 10 most clicked funds on Morningstar.co.uk last month are a varied bunch. Star fund managers continue to be loved by investors: the Silver Rated CF Woodford Equity Income fund, managed by star fund manager Neil Woodford, stays on top of the most popular list on Morningstar.co.uk over the past 15 months. This is followed by the Gold Rated CF Lindsell Train UK Equity which came third on the list. Other popular funds on the list are AXA Framlington Biotech and Gold Rated Jupiter European.
Allianz Global Investors Fund Allianz Income and Growth AM, which has a Neutral Rating by Morningstar analysts, came fifth on the list, followed by the Gold Rated Vanguard LifeStrategy 80% Equity fund. The Gold Rated Fundsmith Equity came second on the list.
Moderate Allocation Funds
Managers of Allianz Global Investors Fund Allianz Income and Growth AM, Douglas Forsyth and Michael Yee, designed the fund to offer a higher yield than its income-oriented peers. “Creating a fund in this manner falls short of industry best practices”, said Morningstar fund analyst Barbara Claus.
To achieve the pay-out, the managers divide the portfolio evenly between convertible securities, high-yield bonds, and equities.
“Trying to meet this distribution target could potentially influence portfolio management decisions in an adverse way; for instance, it could lead to increased, or decreased) risk-taking Allianz Income and Growth has a stable and experienced management team, but a gimmicky process and poor transparency into the fund's underlying components lead to a Morningstar Analyst Rating of Neutral,” said Claus.
Meanwhile, Vanguard LifeStrategy 80% Equity is a strong offering for investors seeking a low-cost, moderately cautious allocation fund,” said Randal Goldsmith, Morningstar fund analyst.
The Vanguard LifeStrategy 80% Equity fund is part of a range of five fixed-allocation funds. Launched at the end of June 2011, this UK range follows the same approach as the longer-running US version, whose funds each have a Gold Morningstar Analyst Rating.
“Within the UK range the equities split is 25% UK versus 75% overseas, and within fixed income the division is 30% UK and 70% overseas. The charges on this product are at the bottom of the category range, and almost 90 basis points below the clean share class median. That provides a significant tailwind to performance versus other funds in the category since few managers are able to generate enough added value from tactical asset allocation and/or fund selection to cover a differential of that magnitude over a full market cycle,” said Goldsmith.
Investors Love the India Domestic Story
India continue to be on top of investors’ minds in May, as data showed that Bronze Rated Jupiter India came forth on the most clicked list by Morningstar.co.uk readers last month, after its first entry in March. The fund was also one of the top 10 most bought funds on Hargreaves Lansdown in ISA season in March.
Indian equity funds perform well year to date. Of six India equity open-ended funds domiciled in the UK, on average they are up 14.8% year to date. The Jupiter India fund has gained 17.1% year to date, according to Morningstar data. The fund gained 21.9% in 2016 while the fund has 26.6% three-year annualised return and 20.3% five-year annualised return.
Lena Tsymbaluk, fund analyst with Morningstar 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.
Investors are also convinced that Indian Prime Minister Narendra Modi’s reform agenda will encourage long-term growth within the country. Modi government has been gradually opening various sectors of the economy to foreign investors, creating opportunities to invest in sectors which were earlier not accessible, said Viktor Nossek, director of research at WisdomTree Europe.
Areas like construction projects, cable networks, agriculture and plantation, air transportation are now allowed 100% in foreign direct investment. Several other key reforms on boosting consumption, infrastructure spending, debt recovery for banks, are also in the process of being implemented.
