July's 10 most-bought funds

UK small and medium-sized companies are once again finding favour with investors as Fidelity UK Smaller Companies joins Neptune UK Mid-Cap in Interactive Investor's top 10 most-bought funds table.

Fidelity UK Smaller Companies was the 10th most-bought fund on Interactive Investor in July, marking the fund's first appearance in the top 10 since March 2013.

Managed by small-cap star Alex Wright, Fidelity UK Smaller Companies has been a consistently strong performer since its launch in February 2008.

In the six years to 1 March 2014, the fund returned 260% compared to an average of 97% from the Investment Association's UK smaller companies sector, making it the best-performing UK smaller companies fund over the period.

Resurgance

Returns have dwindled since the second half of 2014 due to a sell-off in UK smaller companies that negatively affected most funds and investment trusts in the sector.

However, Wright has also not benefited from the resurgence of smaller companies seen this year, delivering third-quartile returns over six months and fourth over three months.

Fidelity UK Smaller Companies joins medium-sized company specialist fund and Money Observer Rated Fund Neptune UK Mid-Cap, which was the fourth most-bought fund in July.

The top-performing fund, managed by the highly rated Mark Martin, re-entered Interactive Investor's top 10 in February after a similar period of absence to Fidelity UK Smaller Companies, indicating that private investors are once again looking towards riskier equities after a disappointing year of returns in 2014.

Tracking success

Tracker funds also appear to be increasingly attracting private investors, with four of the top 10 most bought in July run by passive investment specialist Vanguard. Multi-asset fund of funds tracker Vanguard LifeStrategy 80% Equities was the fifth most-bought fund, moving down one place from fourth most bought in June.

In seventh place was Vanguard LifeStrategy 100% Equities - a global tracker from the same range that is also a regular constituent of Interactive Investor's top table. Vanguard FTSE UK All Share Index and Vanguard FTSE Developed World ex UK Equity Index were the eighth and ninth most-bought funds in July, switching respective positions from June.

With ongoing charges figures typically below 0.3%, index-tracking funds have proved increasingly popular of late, with their share of the UK funds market rising to 12.1% as at the end of June compared to 10.4% in June 2014.

Any charge, however, will mean that most index trackers tend to underperform their respective benchmarks and sectors as they seek only to match an index.

Of the Vanguard funds in the top 10, only Vanguard LifeStrategy 80% Equities has delivered returns significantly above its benchmark and its sector. The fund has delivered 10% over one year and 37% over three years to 31 July, placing it in the first quartile of the IA mixed investment 40 to 85% shares sector over both periods.

Firm favourites

Elsewhere in the top 10, firm favourites have retained their grip on the top spots. CF Woodford Equity Income was the most-bought fund in July for the 13th consecutive month since its launch in June 2014 as Neil Woodford's reputation and star status continue to draw investors.

Money Observer Rated Funds AXA Framlington Biotech and Fundsmith Equity were the second and third most-bought funds in July for the eighth and fifth consecutive months respectively.

Both funds have delivered strong returns over the past three years. AXA Framlington Biotech has enjoyed a surge in the biotechnology sector since 2012, returning 184% in the three years to 31 July while Terry Smith's global equity fund has rarely left the first quartile since its launch in late 2010.

Fellow Money Observer Rated Fund Artemis Global Income was the sixth most-bought fund last month for the second consecutive month. The fund has remained consistently in the top 10 over the past year as manager Jacob de Tusch Lec continues to deliver both strong total returns and an attractive level of income.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.