Best-Selling Funds of May 2023

Fundsmith Equity and Fidelity Index World are still up there. Perennially popular, the founder and manager of Fundsmith Equity says that he picks companies which make decent things which aren’t trendy flashes in any pan. He picks things for the long-term and holds on to them. With ‘no funny business’. Whatever he is doing it works for his loyal followers. Despite a tougher year recently, the 5 year returns are 80%.

Fundsmith Equity has been a popular strategy amongst investors over the years, with the manager focusing on a relatively focused portfolio of quality companies held for the longer term.

Amidst a high inflationary environment and sharply rising interest rates last year, the fund had a tough time, underperforming both the broader market and its peer group. However, central banks are now becoming more measured in respect of future interest rate increases, with the Fed pausing at its latest meeting as it seeks to assess the impact of the tightening cycle before proceeding further. Markets are forward-looking, anticipating a fall in rates, which boosts performance of long duration assets, such as those held by Fundsmith Equity.

Technology stocks have been a dominant feature this year, having made a decisive comeback following a sharp sell-off through 2022. Based on data to the end of May, the tech-heavy Nasdaq in the US delivered gains exceeding 20% on the back of strong earnings and as the markets are pricing in a pivot in the hiking cycle by central banks. Microsoft is a top holding for the fund, contributing to a strong run for the manager year to date. The stock and the broader sector received a valuation boost from a new type of artificial intelligence (generative AI) and the rollout of ChatGPT, which is part-owned by Microsoft.

Elsewhere, the fund has meaningful exposure companies such as LVMH. The luxury goods sector has rebounded on the strength of Chinese consumers and the associated post-lockdown pent up demand. The change in dynamics saw LVMH recently becoming the first European company to reach a $500bn valuation.