What funds did investors buy in September?

WORLD stock and bond markets slipped in September, as investors digested an outlook of “higher for longer” interest rates. Statements from central banks towards the end of the month made it clear that policymakers want to stamp out inflation once and for all this cycle. Rising oil prices amid falling inventories compounded market worries.

In this environment and after a strong rally in late August, growth stocks faltered. Meanwhile, some value stocks picked up the baton. For example, a variety of out-of-favour banks and bond proxies – shares that behave a bit like bonds in terms of income and capital returns – underwent a mini revival.  

Growth stocks – often typified by shares in tech companies – are anticipated to compound consistent growth year after year. So, by definition, growth stocks have the bulk of their future earnings way out into the future.

Whereas value stocks – as defined by metrics such as dividend yield and balance sheet asset values – tend to offer more of a balance between returns to shareholders today and investing for future growth. 

Thus, high interest rates in the intervening years stand to erode the present day value of the earnings of growth stocks more than they do the earnings of value stocks.

The effects of this weren’t really discernible from the list of best sellers in September. Agnostic stock index trackers and world technology funds remained very popular, alongside several money market funds. There was a new arrival though, in the shape of the Legal & General Global 100 Index Trust.

Meanwhile, the Fidelity Index World Fund spent another month in pole position for ISAs, but slipped a couple of places to third for SIPPs. This fund tracks the MSCI World Index converted back into sterling. It has an ongoing charge of just 0.12%, so offers an attractive way of diversifying away from an investment portfolio composed mainly of UK shares at minimal cost.

The Fidelity Index US Fund rose to second place for ISAs and became the most bought fund for SIPPs.  

Money market funds featured a little less heavily than in August, when they took three of the top five places for both ISA and SIPP purchases. They remained in strong evidence though, with the £1.2 billion Fidelity Cash Fund being the top choice. Following recent increases in central bank interest rates, money market funds now offer an appealing combination of safety and income.

The Fidelity Global Technology Fund gained a couple of places for ISA purchases in September while the Legal & General Global Technology Index Trust remained solidly mid-table.

Between them, these funds illustrate the vastly differing approaches that can be applied by ostensibly similarly exposed portfolios.

The former is a highly selective investor in the technology space, which targets growth companies with disruptive technologies; more cyclical businesses with stronger balance sheets; and special situations that are either undervalued or expected to benefit from a forthcoming catalyst. The Fund’s largest holdings at the end of July were: Microsoft (5%); Apple (4.8%); and Amazon (4.2%).

The latter tracks the FTSE World Technology Index, so currently has around 85% invested in the US.  Apple and Microsoft dominate the portfolio holdings accounting for around 35% between them, followed by NVIDIA (8%) in third place¹.

The Fundsmith Equity Fund continued to occupy the lower reaches of the top-10 tables for both ISAs and SIPPs in September. After a leave of absence during a tough 2022, this fund returned to the top of Fidelity’s best seller lists in April and has remained there since.

The portfolio’s makeup has changed quite a bit over the past couple of years, with consumer staples and healthcare companies now accounting for around 60% of the Fund’s assets. At the end of August, technology represented only around 10% of the portfolio.  

Even so, two mega-cap tech stocks – Microsoft and Meta – feature among the Fund’s largest holdings and biggest year-to-date winners. Also after an impressive run, Novo Nordisk – the Wegovy weight-loss drug firm – is now the Fund’s largest holding².

Nick Sudbury took a look earlier this week at funds that might fit with the Fundsmith Equity Fund and it’s well worth a read if you’re a holder.

The new entrant in tenth place for ISA purchases – the Legal & General Global 100 Index Trust – tracks the S&P Global 100 Index. As such, it’s akin to a FTSE 100 for the world. The Trust’s top holdings list is dominated by mega-cap technology stocks, with Exxon Mobil the first non-tech company in seventh position³.

Top 10 best-selling ISA funds on Fidelity Personal Investing in September 2023

1. Fidelity Index World Fund
2. Fidelity Index US Fund
3. Fidelity Global Technology Fund
4. Fidelity Cash Fund
5. Legal & General Global Technology Index Trust
6. Royal London Short Term Money Market Fund
7. Legal & General UK Index Trust
8. Fidelity Index UK Fund
9. Fundsmith Equity Fund
10. Legal & General Global 100 Index Trust

Top 10 best-selling SIPP funds on Fidelity Personal Investing in September 2023

1. Fidelity Index US Fund
2. Fidelity Cash Fund
3. Fidelity Index World Fund
4. Royal London Short Term Money Market Fund
5. Legal & General Cash Trust
6. Fidelity Global Technology Fund
7. Legal & General Global Technology Index Trust
8. Rathbone Global Opportunities Fund
9. Vanguard Lifestrategy 80% Equity
10. Fundsmith Equity Fund

Source: Fidelity International. Gross ISA and SIPP sales in September 2023 for Personal Investors only.

Sources

¹ LGIM, 31.08.23
² Fundsmith, 31.08.23
³ LGIM, 31.08.23

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing into a fund, please read the relevant key information document which contains important information about the fund. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment.  If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.