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Best-selling funds of July 2020 - active funds gain popularity

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More and more people are beginning to see investing as essential to their long-term financial plans – investment provider Vanguard, for instance, has seen 3x as many accounts opened as this time last year. But what is everyone investing in?

Largely in response to Covid-19, an influx of new investors isn’t the only emerging phenomena. When we take a look at the best-selling funds of the last few months, there’s been a clear switcheroo on where people are putting their money: 8 out of 10 funds on Interactive Investor's most-bought funds of July list are active funds, compared to only 2 in March.

Active funds v passive funds: a quick recap

Active funds
Most funds in the market are what we call ‘active’. An active fund manager is a person who thinks he or she is smarter than the average investor. They think they can spot a bargain. Identify the region or market that is about to go belly-up. So they actively pick and choose what goes into the fund.

Passive funds
Passive funds are devoid of ego and opinion. No one makes a call on whether Share A is better than Share B. A computer simply follows what we call an index, or a list of how shares or bonds are performing in any given market, then buys them in proportion to their size. It's a cheap auto-pilot mode with no judgement calls.

 

Best-selling funds of July 2020 – the rise of active funds

Back in March, Interactive Investor's top 10 best-selling fund list included 8 passive funds and 2 active funds. By July, investors had made an about turn. Interactive Investor’s newest list includes 2 passive funds and 8 active funds.

Top 10 most-bought funds on Interactive Investor in July 2020

Position Fund Active/Passive
1 Fundsmith Equity Active
2 Baillie Gifford American Active
3 Baillie Gifford Positive Change Active
4 Baillie Gifford Global Discovery Active
5 Baillie Gifford Long-Term Global Growth Active
6 Vanguard LifeStrategy 80% equity Passive
7 Baillie Gifford China Active
8 Baillie Gifford Managed Active
9 Vanguard LifeStrategy 60% equity Passive
10 Polar Capital Global Technology Active

 

Top 10 most-bought funds on Hargreaves Lansdown in July 2020 (ranked alphabetically)

Alphabetical Fund Active/Passive
1 Baillie Gifford American Active
2 Baillie Gifford China Active
3 Baillie Gifford Global Discovery Active
4 Baillie Gifford Long Term Global Growth Active
5 Baillie Gifford Managed Active
6 Baillie Gifford Positive Change Active
7 Fundsmith Equity Active
8 JPMorgan Emerging Markets Active
9 LF Blue Whale Growth Active
10 Rathbone Global Opportunities Active

 

Personal Investing - Top 10 Selling Funds (July 2020) on Fidelity

Position Fund Active/Passive
1 Baillie Gifford American Fund Active
2 Rathbones Global Opportunities Fund Active
3 Baillie Gifford Long Term Global Growth Active
4 Baillie Gifford Positive Change Fund Active
5 Baillie Gifford Global Discovery Fund Active
6 Ninety One Global Gold Fund Active
7 Baillie Gifford Pacific Fund Active
8 Baillie Gifford European Fund Active
9 Fidelity Multi Asset Balanced Fund Active
10 Baillie Gifford China Fund Active

 

Top 10 most-bought funds on AJ Bell in July 2020

Position Fund Active/Passive
1 VT AJ Bell Adventurous Passive
2 Fundsmith Equity Active
3 VT AJ Bell Moderately Adventurous Passive
4 VT AJ Bell Balanced Passive
5 VT AJ Bell Global Growth Passive
6 Baillie Gifford American Active
7 Vanguard LifeStrategy 80% equity Passive
8 Polar Capital Global Tech Active
9 Billie Gifford Positive Change Active
10 Vanguard LifeStrategy 100% equity Passive

 

How do the fund experts explain it?

Teodor Dilov, Fund Analyst at Interactive Investor, comments:

“Baillie Gifford replaced Vanguard in July as the dominant name in the top 10 most purchased funds, suggesting a recent trend towards active solutions at the expense of passive funds amid a period of heightened market volatility owing to Covid-19. The current market condition is ripe for active managers to show why it is worth paying a bit more for an actively managed solution by taking advantage of perceived inefficiencies in the market.”

In other words, active funds are likely becoming more popular because they are more able to adapt to or take advantage of the uncertainties facing the stock market during the Covid-19 pandemic. Active funds have a human manager pulling the strings, who can adjust the fund in response to what the stock markets and society is doing. Passive funds are cheaper but far less flexible, leaving the stock-picking and allocation to algorithms and computers instead of a human or team.

Interactive Investor’s Dilov also points out:

“Our customers also continue to favour the diversification offered by global strategies, which account for 8 out of the top 10 bestsellers in July. Appetite for the UK remains soured, with Brexit set to come back into focus as the transition period enters its final months.”

 

Where do you stand on active vs passive funds?

Have you changed your investing style in response to Covid-19? Do you think active makes more sense now, or is passive still the better deal in your eyes? Let us and other investors know in the comments below.

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Index Funds 2.jpg

Index Funds Explained

Index fund is a fancy name for a simple idea. They go by a number of fancy names, in fact – passive, exchange traded funds (ETFs), trackers. At heart, they all do the same thing: instead of some pointy-headed person picking the shares that go into the fund, they simply replicate an index.

Index Funds Explained

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Comments

Ian Hunter
Until recently I had a combination of both. I've now dumped the trackers because it was clear that the funds were performing significantly better. I think trackers are solid safe investments but for the best returns funds give higher returns in my experience. I had Vanguard trackers. My funds are with Baillie Gifford Polar Capital and Fundsmith.
19/08/2020 12:06:02
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