Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

THOSE companies hardest hit by the Covid-19 outbreak have sprung back into life since the start of the year, as restrictions have eased and economies have revived. However, investors on Fidelity’s personal investing platform aren’t seduced. The top five best-selling funds suggest they want reliable growth, rather than to take any risks on an insecure recovery.

At the launch of the Fundsmith Equity Fund, Terry Smith vowed to run “the best fund there has ever been”.1 Perhaps more astonishing is that he has almost lived up to this bold claim. The fund’s focus on high quality companies that deliver a high return on capital employed – a measure of how successfully they spend the money that comes into the business – has been in tune with the market mood and the fund has performed strongly.

At the start of the year, it looked like the Fundsmith Equity Fund’s Smith’s run of performance might finally draw to a close. The Covid laggards that led the market higher, such as leisure, retail or restaurants, don’t feature significantly in the portfolio. The fund is also significantly weighted to the US, which temporarily fell out of favour. This was only a short-term concern for Smith’s many fans. By the middle of the year, worries over rising case numbers, inflation and higher interest rates had dampened enthusiasm for recovery names, allowing the fund to reclaim its place at the top of the ‘most popular’ list for August.

Source: Fidelity International. Gross sales in August 2021 for Personal Investors only.

The list also shows that investors continue to prefer tracker funds over active funds when it comes to the US market. Few active funds have beaten the market and it has given investors a large weighting in the buoyant technology sector. Although the sector slept through the early part of the year, the likes of Google, Facebook, Amazon and other large technology companies have subsequently delivered earnings ahead of market expectations pushing share prices higher.

Nevertheless, investors should be aware of the risks. Netflix share price struggled in 2021 as subscription figures started to slow,2 showing it is possible for the crown to slip from highly valued technology names. The sector is also vulnerable to rising interest rate expectations. Holding an active global or North American income-focused fund may provide some balance.

The imminent COP26 conference on climate change and its biodiversity equivalent COP15 are due in the next few months, pushing environmental concerns up policymakers’ agendas. It is also an increasing priority for investors with Baillie Gifford’s Positive Change Fund appearing on the best-selling list this month. The fund has been running since 2017, investing in high growth companies making a tangible positive impact. Baillie Gifford has an unrivalled network for uncovering innovation and a well-deserved reputation for supporting growing companies. Among its holdings are US vaccine innovator Moderna, Argentine online marketplace Mercado Libre and Danish wind farm group Orsted.3

Rathbone Global Opportunities Fund has once again found favour with investors and it features on Fidelity’s Select 50 list. Thomson takes a highly active approach, which can make this fund a good complement to index exposure, such as the ever-popular Fidelity Index World Fund.

James Thomson on the investment changes in the Rathbone Global Opportunities Fund over the last 18 months

Source:

1 Fundsmith Equity Fund Owner’s Manual, September 2021
2 Yahoo Finance, September 2021
3 Baillie Gifford, September 2021

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. All the five funds listed invest in overseas markets so the value of investments can be affected by changes in currency exchange rates. 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. The Investment Manager of the Baillie Gifford Positive Change Fund’s focus on securities of companies which maintain strong environmental, social and governance (“ESG”) credentials may result in a return that at times compares unfavourably to similar products without such focus. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. Select 50 is not a personal recommendation to buy or sell a fund. 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 a Fidelity adviser or an authorised financial adviser of your choice.

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