Investors have have been drawn towards global exposure throughout the second quarter of 2024, with nearly a third of Interactive Investor’s most popular funds investing in global shares.
In Interactive Investors’ new index, which ranks the top 50 funds based on the number of purchases, not volume, made by customers over a three-month period, funds investing in global shares took up 15 of the top 50 slots. Funds in the US market accounted for seven of the 50, while the UK held three and India, two.
Kyle Caldwell, funds and investment education editor, said: “Going global has the benefit of spreading risk as such funds have the freedom to invest across the world in any country or sector. A global approach also means that investors, particularly those in index funds or ETFs, will gain exposure to the US technology giants, which have delivered strong returns for more than a decade with shares accelerating again at the start of 2023.”
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The attraction towards technology giants also showed in seven funds that were dedicated to the tech sector, including three actively-managed funds and four passive funds. However, Caldwell noted there can be danger in “identifying a theme late in the day”.
“One thing to bear in mind is that some of these passive approaches have big weightings to the largest tech stocks,” Caldwell said.
“As a result, any downturn in tech performance will have a big influence on overall returns. As ever, it is important that investors look under the bonnet and understand how much concentration risk they are exposed to. A look at the top 10 holdings will provide a quick snapshot.”
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The top 50 also included 20 investment trusts, including two technology trusts and four from the energy infrastructure sector. The 288 investment trusts currently publishing NAVs are trading on an average 17.7% discount, according to IpsoFacto Investor.
“Investment trusts feature much more heavily than funds, with 20 making the table versus just four funds,” Caldwell said.
“Due to their structure, investment trusts have a number of bells and whistles that private investors can take advantage of, including the ability to buy on a discount to net asset value (NAV) and in having revenue reserves, which is why many investment trusts have long track records of growing dividends year in, year out.”
By fund, the most popular for investors was the Vanguard S&P 500 ETF (distributing), Vanguard LifeStrategy 80% Equity, Scottish Mortgage, L&G Global Technology Index Trust, and the Vanguard S&P 500 ETF (accumulation). Six new funds entered the list, including the NextEnergy Solar Fund, Vanguard FTSE Developed World ETF, Supermarket Income REIT, Fidelity European trust, Henderson Far East Income and Vanguard FTSE 100 ETF.
“Those that would have made the list in the first quarter, but no longer make the top 50 in the second quarter, were India Capital Growth, Digital 9 Infrastructure, Liontrust Global Technology, Primary Healthcare Properties, iShares Nasdaq 100 ETF and L&G International Index Trust,” Caldwell said.
“The split between the number of active and passive funds, 24 and 26 respectively, remained the same quarter-on-quarter.”
