What funds did investors buy in August?

Having risen strongly for most of the summer, world markets turned much more volatile in August. In part the volatility was caused by growing unease about the valuations of AI-themed shares. Markets also became more questioning about the robustness of the US economy, after previous jobs figures saw a significant downward revision.

An unwinding of the so-called “yen carry trade” also temporarily unsettled markets. This came about after the Bank of Japan raised interest rates at the end of July, in the process removing the possibility of borrowing at near zero cost to invest in higher yielding assets.

Shares ended the month on a high note with the Dow Jones Industrial Average reaching a succession of new all-time highs after growth fears faded. Data released towards the end of the month showed the US economy grew at a revised 3.0% annual rate in the second quarter¹. This reinforced hopes the economy will achieve a soft landing after a year of elevated interest rates.

Despite increased market unease in early August, the most popular funds at Fidelity Personal Investing remained broadly unchanged and split between those producing an attractive income and those enjoying the benefits of technology fuelled growth.

For income investors, money market funds continued to rule the roost. These still offer yields close to the 5% mark without the greater risks associated with funds investing in shares or bonds. Please note, money market fund yields are not guaranteed.

The Fidelity Index World Fund was the most bought fund for ISAs and was in second place for SIPPs. This fund tracks the MSCI World Index on a net total return basis. Returns are automatically converted back into sterling, providing UK investors with a straightforward and cost-effective route to geographic diversification. The Fund’s ongoing charge is 0.12%.

The Fidelity Cash Fund took the same two places in reverse order, while the Royal London Short Term Money Market Fund was the third most bought fund for SIPPs and fifth most popular for ISAs. Both of these funds are benchmarked to the Bank of England’s SONIA interest rate, which reflects the rate that banks pay to borrow sterling overnight from other financial institutions.

SONIA slipped to 4.95% from 5.2% after the Bank of England cut its Bank Rate by a quarter point to 5.0% on 2 August². This rate will reduce further should the Bank of England cut its Bank Rate again. For now though, SONIA remains more than twice as high as inflation (2.2% in July)³.

The remaining money market fund to make these lists, and in fifth place for SIPP purchases, was the Legal & General Cash Trust. This differs from its close rivals in that it is benchmarked to its Short Term Money Market Sector peers.

As in July, the Legal & General Global Technology Index Trust took third place for ISAs but slipped from second to seventh for SIPPs. This fund tracks the FTSE World Technology Index and had 250 separate holdings as of the end of July. The ten largest holdings – led by Apple, Microsoft and Nvidia – make up around 70% of the portfolio⁴.

The Fidelity Global Technology Fund – in fourth place for both ISAs and SIPPs – has the ability to lessen concentrations in the market’s biggest stocks or miss them out altogether. Taiwan Semiconductor, the maker of high-end Nvidia AI chips, currently accounts for 6.5% of the portfolio. Microsoft and Apple– 5.6% and 5.1% of the portfolio – come next. The hardware makers Texas Instruments, Cisco Systems and Sweden’s Ericsson also feature among the top 10 holdings.

Once again, the Fidelity Index US Fund was the most popular single country fund to feature on these lists, ranking in sixth for ISAs and tenth for SIPPs. Like the Fidelity Index World Fund, this fund tracks its target index (the S&P 500 in this case) on a net total return basis.

In seventh place for ISAs and eighth for SIPPs, the Fidelity Global Dividend Fund was the second most popular actively managed equity fund in August. This fund aims for a dividend based total return, with capital preservation its top priority.

Europe accounts for the fund’s largest exposure at present, with the US close behind. The Fund has large weightings in companies with defensive earnings, such as consumer staples and pharmaceuticals. Even so, financial services companies and industrials account for the largest sector weights currently.

• Watch Dan Roberts, portfolio manager of the Fidelity Global Dividend Fund, share his case for global investing at our recent Wealth Investor Forum. 

For ISA purchases, the Fidelity Special Situations Fund flanked by two UK index trackers – the Legal & General UK Index Trust and the Fidelity Index UK Fund – rounded out the list.

The former is a contrarian, value-biased fund focused on underappreciated businesses mostly in the UK. As such, it offers an exposure to companies often not covered by other popular UK funds.

This fund currently has a broad-based portfolio of 107 separate holdings, with a 22% exposure to financials – mostly banks and life insurers. Current large holdings include Imperial Brands, the Irish sales and marketing group DCC and Aviva.

For SIPPs, the Legal & General Global Equity Index Fund rose to sixth place from tenth in July. This fund aims to deliver growth and income by tracking the performance of the FTSE World Index.

Finally for SIPPs, the Vanguard LifeStrategy 60% Equity Fund displaced the Vanguard LifeStrategy 80% Equity Fund from the top 10. This fund more closely matches the classic 60/40 shares-bonds mix that pension funds and other long-term investors often aim to own.

While this fund invests mainly in index tracking funds from the Vanguard stable, there is an active element in that the manager has discretion over which funds are selected and how much is invested in each.

Top 10 best-selling ISA funds on Fidelity Personal Investing in August 2024

1. Fidelity Index World Fund
2. Fidelity Cash Fund
3. Legal & General Global Technology Index Trust
4. Fidelity Global Technology Fund
5. Royal London Short Term Money Market Fund
6. Fidelity Index US Fund
7. Fidelity Global Dividend Fund
8. Legal & General UK Index Trust
9. Fidelity Special Situations Fund
10. Fidelity Index UK Fund

Top 10 best-selling SIPP funds on Fidelity Personal Investing in August 2024

1. Fidelity Cash Fund
2. Fidelity Index World Fund
3. Royal London Short Term Money Market Fund
4. Fidelity Global Technology Fund
5. Legal & General Cash Trust
6. Legal & General Global Equity Index Fund
7. Legal & General Global Technology Index Trust
8. Fidelity Global Dividend Fund
9. Vanguard LifeStrategy 60% Equity Fund
10. Fidelity Index US Fund

Source: Fidelity International. Gross ISA and SIPP sales in August 2024 for Personal Investors only.

Sources

¹ BEA, 29.08.24
² Bank of England, 01.08.24
³ ONS, 14.08.24
⁴ LGIM, 31.07.24 

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