The most-traded funds of 2016 so far

So far, 2016 has been a story of volatility for global stockmarkets. Therefore, it has perhaps no surprise that Interactive Investor clients entrusted their cash to established, big-name fund managers in search of higher returns, data has shown.

Bad news from both China and Japan and concern over the outlook for the global economy meant the FTSE 100 made its worst ever start to a year and was trading at 5,499 at one point in February, a three-and-a-half-year low and 12% down since 31 December 2015.

By April the blue-chip index had rallied almost 1,000 points, but was then hit by the referendum campaign and fears that a "Brexit" would bring on another recession.

When the 'leave' vote was announced, then, the FTSE 100 yet again fell below the 6,000 level and the FTSE 250 was hit even worse.

Fundsmith tops list

Just over a month later, however, both indices had bounced and the FTSE 100 currently trading around the 6800 mark. The FTSE 250, meanwhile, is trading at its highest point of the year.

Against this backdrop, then, it is offerings from Terry Smith (Fundsmith Equity) and Neil Woodford (CF Woodford Equity Income) that top the list of most-traded funds on the Interactive Investor platform from 1 January to 31 July.

The list looks remarkably similar to how it looked this time last year, with just one change to the top five. One main difference is that Smith's fund, the most-bought fund on Interactive Investor for the past four months, pipped Woodford's offering into first place.

Fundsmith, a perennial favourite and Money Observer Rated Fund, has held up well during the volatility, returning 2.3% over the one month to 4 August and 23% year to date. Its longer-term performance is more impressive, delivering gains of 166.1% over five years.

Its investors benefit from a concentrated, global mandate (it has just 28 holdings) and his "buy-and-hold" strategy: his approach is to buy good companies, try not to overpay and then do nothing.

Woodford pipped

Woodford Equity Income sits in second position, having had an ongoing battle with Fundsmith for the most-bought fund title: the pair have dominated the top two for 10 months now.

Woodford's fund topped the charts from August 2014 until Fundsmith knocked it off its perch in January 2016. In just over two years since launch, the fund has grown to over £9 billion in assets under management.

The fund has returned 3.7% in the year to 4 August, but has performed better over shorter timeframes, having gained 4.6% over the past month and 7.4% in three months.

Woodford has continued his tried and trusted approach of investing in large-cap, high-yielding firms like Imperial Brands, AstraZeneca and GlaxoSmithKline combined with smaller, often early-stage UK-based companies.

His liking for the latter type of firm spawned his newest venture, the closed-ended CF Woodford Patient Capital.

Best of the rest

Fundsmith has actually leapfrogged two in last year's list, with fellow Money Observer Rated Fund Axa Framlington Biotech slipping from second to third place, while Artemis Global Income, also a Rated Fund, retains its fourth spot.

After a stellar run of performance, the Axa fund was the second most-bought fund between December 2014 and August 2015. Returns of 263% over five years to 4 August have rewarded longer-term investors handsomely.

The volatile nature of the biotechnology sector, though, has seen performance slow and it has made a loss over the year to 4 August of 12.7% and is the worst-performing fund in its 127-strong sector.

But a couple of index-tracking offerings are in the top 10, both from HSBC. Its FTSE 250 Index is sixth and FTSE All Share Index ninth.

Elsewhere in the top 10 are Newton Global Income in seventh and two Invesco Perpetual funds: Income (eighth) and High Income (10th).

This article was originally published by our sister magazine Money Observer here

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.