The Scottish Mortgage investment trust and the Fundsmith Equity fund have finally ceded their positions at the top of Interactive Investor’s platform purchases, replaced by the City of London investment trust and the Royal London Short Term Money Market fund.
This is the first time since June 2019 that Scottish Mortgage has not topped this list, and the first time since March 2021 that Fundsmith Equity has not. Interactive Investor explained the change was due to a shift towards income-focused strategies, and the two funds still occupy second place in the rankings.
Kyle Caldwell, collectives editor at Interactive Investor, said: “As part of a wider trend that’s been playing out for around two years, growth strategies have been losing out to income strategies in the popularity stakes, further reflected in October by City of London and Royal London Short Term Money Market becoming the most-bought investment trust and fund among our customers.
“The demand for income is intensifying as investors attempt to protect their portfolios against the high levels of inflation. As a result, investors are increasingly turning their attentions towards funds and investment trusts offering eye-catching yields.”
Other funds ranking in Interactive Investor’s top ten include five Vanguard funds, the HSBC FTSE All World Index, Jupiter India, and the Legal and General Global Tech Trust. Among investment trusts, Greencoat UK Wind took third place, followed by Merchants Trust and Blackrock World Mining.
Six of the top 10 investment trusts were income-focused strategies, led by City of London. Within the top trusts, Greencoat UK Wind returned 6.4%, BlackRock World Mining hit 7.4% and Merchants Trust yielded 5.7%.
“The demand for high income is much more prevalent among the most-bought investment trust rankings,” Caldwell said.
“Bear in mind that high yields are not guaranteed, and in some instances can be a warning sign that the income on offer is not sustainable. In addition, while high yields offer investors the prospect of higher income today, there are no guarantees that this will result in market-beating returns from a total return perspective – when both capital and income are combined.”
Interactive Investor also revealed that global and passive funds have become the frontrunners of the month, now led by Royal London Short Term Money Market which established its spot in the top ten in April.
“Money market funds own a diversified basket of low-risk bonds that are due to mature soon, meaning that investors can earn an income on their cash with minimal risk,” Caldwell said.
“More broadly, II customers continue to favour fund strategies that have their fingers in a number of investment opportunities globally, offering diversification amid market uncertainty stoked by a number of factors including high interest rates, inflation, and geopolitical tensions.”