Nine of out of ten of the most popular funds among AJ Bell users so far this year were trackers, according to the platform, with Terry Smith’s £24bn Fundsmith Equity the only actively-managed vehicle remaining on the list.
Of these nine trackers, four of them were ETFs – Vanguard S&P 500 ETF, iShares S&P 500 ETF, iShares Core FTSE 100 ETF and Vanguard FTSE All-World ETF.
Smith’s behemoth fund took top spot on the list of most popular offerings, while Fidelity Index World and Vanguard LifeStrategy took silver and bronze place respectively. Other funds worthy of note include Vanguard FTSE Global All Cap Index, HSBC FTSE All World Index and UBS S&P 500 Index.
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Laith Khalaf, head of investment analysis at AJ Bell, said the fact Fundsmith Equity is the “only fund left carrying the torch for active management” in the top ten suggests it is shaping up to be “another challenging year for active managers”.
“To be fair, active managers offer more of a split ticket to investors than tracker funds, which are dominated by a small clutch of providers and markets, and therefore it’s natural for more passive money to gravitate to a smaller pool of funds,” he reasoned.
“Few active managers have anything approaching the brand awareness of Fundsmith, and it’s perhaps therefore not too surprising to see individual active funds gradually slipping off the leaderboard among DIY investors.”
Laith added that the recent US tech bounceback will have only bolstered investors’ interest in US equity funds, while UK trackers have likely increased in popularity as a contrarian play.
“Valuations are less demanding, but earnings growth prospects aren’t as promising as in the US,” he added. “Despite starting the interest rate hiking cycle first, the UK also has a sticky inflation problem, which is taking its own sweet time to dissipate.”
