2018: A year for
diversification

Published: 4 December 2018

Diversification appears to have been the name of the game for our customers in 2018, likely reflecting the impact of political and economic uncertainty on investment decisions.

From Brexit to Brazil, and trade wars to midterm elections, there have been plenty of political developments to keep investors on their toes this year, along with macro movements including a UK interest rate rise and the European Central Bank’s plans to end its monetary easing1.

A glance at our top-selling investment trusts, funds and shares2 this year, reveals the popularity of holdings that offer exposure across different sectors and regions, and also suggests that income remains a key priority for our customers.

Investment Trusts

The same trusts occupy the top three positions as in 2017 – Scottish Mortgage Investment Trust, Alliance Trust and Personal Assets Trust – but beyond that there is a distinctly global flavour. Could this be a sign of Brexit uncertainty and brittle confidence in the UK economy affecting investor sentiment and preferences?

If yes, beneficiaries have included the Baillie Gifford US Trust, JP Morgan Japanese Trust and Edinburgh Worldwide Trust, all making an appearance in the top 20 this year.

A smattering of property trusts, with a UK focus, are an exception to the global theme. That may be because of their potential to generate income for investors. A number of the trust best-sellers are also among the “dividend heroes” identified by the Association of Investment Companies as having increased their dividends annually over the long term3.

High profile fund manager Terry Smith finds himself with two trusts in our top 20, with both the Fundsmith Emerging Equities Trust and his recently launched Smithson Trust, which specialises in global small and medium companies, making the list.


Top 20 investment trusts from 1 January to 27 November 2018
Fund ID
1
Scottish Mortgage Investment Trust
SMT
2
Alliance Trust
ATST
3
Personal Assets Trust
PNL
4
Worldwide Healthcare Trust
WWH
5
Smithson Investment Trust
SSON
View top 20

Funds

There is a distinctly global flavour to the best-selling funds list too, with fewer UK-focused vehicles proving popular with our customers in 2018. Among those in the top 20 in 2017 but not this year were the Vanguard FTSE All Share Fund, the Henderson UK Absolute Return Fund and the CF Woodford Equity Income Fund, the bulk of which is invested in UK equities.

This year, Vanguard’s low-cost, passive LifeStrategy funds account for four of the 20 best sellers. The two most popular LifeStrategy funds are those investing approximately 40% or 60% in equities, perhaps pointing to a more cautious mood among fund buyers.

Other mixed asset vehicles to have sold well include the Baillie Gifford Managed (a newcomer this year), the Brooks Macdonald Defensive Fund and the HSBC Global Strategy Balanced Fund.

The impression of investor caution is reinforced by the biggest-selling fund of the year being the Royal London Short-Term Money Market Fund, which aims to maximise income by investing entirely in money markets.

The appearance of Royal London’s Sterling Extra Yield Bond and Cash Plus funds may point to investors preparing for a market cycle that many predict will soon enter a recessionary phase.


Top 20 funds from 1 January to 27 November 2018
Fund ID
1
Royal London Short Term Money Market Y Inc
RLCASH
2
Lindsell Train Global Equity
7GGLOE
3
Fundsmith Equity I Acc
FUQUIT
4
Vanguard LifeStrategy 60% Equity A Acc
VVLFST
5
Vanguard LifeStrategy 40% Equity A Acc
VVLFSU
View top 20

Shares

Perennial favourites continue to dominate the best-selling shares list. The most obvious explanation is that in an ongoing low interest rate environment, the main investor demand is still for companies paying regular dividends. Typically these would feature prominently in UK equity income funds and include the likes of Lloyds Banking Group, Royal Dutch Shell and Vodafone.

Lloyds, which only returned to the private sector in 2017, is the most popular share among our customers for the second successive year, while Shell and BP again appear in the top five.

The latter two are, like many of the most popular stocks here, among the 70% of companies listed on the FTSE 100 that derive their earnings overseas4, and which have therefore benefited from the pound weakness that has persisted since the 2016 EU referendum.

This reflects a theme that threads through investment trust and fund sales too – a relatively low exposure to UK-focused investments amid uncertainty around the domestic outlook.

Most changes to our top 20 shares, compared to last year, are largely unsurprising. For instance, Carillion was popular with our customers last year, but entered liquidation in January 2018 amid scandal and controversy. And two of the four newcomers to the list – Premier Oil and Tullow Oil – have likely benefited from the increase in the oil price (most recently due to concerns over the effect of US sanctions on Iranian oil exports and an indication from Saudi Arabia that production could be cut)5.


Top 20 shares from 1 January to 27 November 2018
Fund ID
1
Lloyds Banking Group
LLOY
2
Royal Dutch Shell
RDSB
3
Vodafone Group
VOD
4
BP
BP.
5
Premier Oil
PMO
View top 20

Another consistent picture

Perhaps the most notable feature of our best-seller lists is that they all remain relatively consistent with last year, in terms of composition, themes and balance.

Economic and political developments clearly have an impact on sentiment, but while the short-term noise can be distracting, our customers do appear to be keeping their eye on the long term, continuing to favour investments that offer diversification and the potential for income.

Important information

This is provided for general information only and takes no account of personal circumstances. It is not a recommendation to buy or sell. It is provided solely to support you in making your own investment decisions. If you have any doubts as to their suitability you should seek expert advice. Alliance Trust Savings does not give financial or investment advice.

Laws and tax rules may change in the future without notice.

Please be aware that the value of investments can fall as well as rise so you could get back less than you invest.


1 Guardian, ECB calls halt to quantitative easing, despite ‘soft’ Euro, 14 June 2018.
2 From 1 January to 27 November.
3 Association of Investment Companies, Dividend heroes, 12 March 2018.
4 Guardian – ‘UK-focused firms have struggled since Brexit vote, analysis finds’ – 25 June 2018.
5Guardian – ‘Oil prices rise as Saudi Arabia signals production cut’ – 12 November 2018.

Bundles of opportunity

If you’re a frequent trader, remember you can trade online for less than our standard online trading charge by buying one of our pre-pay trading bundles.

The more you buy the greater the discount. Terms and Conditions apply.

More

Alliance Trust Savings Limited is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings Limited gives no financial or investment advice. ‘Alliance Trust Savings’, ‘ATS’ and 'AT Savings' are all brand names of Alliance Trust Savings Limited together with the ‘Alliance Trust Savings’ logo are owned by and used with the permission of Alliance Trust PLC, the previous owner of Alliance Trust Savings Limited.