Investors back America and Tech during market turmoil

Ryan Hughes, head of active portfolios at AJ Bell, comments on the most purchased investments via the AJ Bell Youinvest platform during the first half of 2020:

“While some regular names crop up on our most-purchased list such as Fundsmith Equity and the Vanguard LifeStrategy range, there are some funds that have shot up the list thanks to the market turmoil we’ve seen over the past six months.

“The Polar Capital Global Technology fund has seen its assets soar during the crisis, and as a result has now soft-closed to new investors after seeing £1.6bn of inflows over just three months. As we’ve all had to set up offices at home, use technology to communicate with people rather than doing so face-to-face and rely on TV to entertain us, technology stocks and funds have risen in popularity as investors are keen to get a slice of this growth. Investors who moved into the Polar Capital fund have been well rewarded, with the fund returning 30% in the first six months of the year, compared to a fairly flat performance from global markets over that time – the MSCI World index returned -0.2%.

“American markets have bounced back much more rapidly than the UK, so it’s no surprise to see Baillie Gifford American in the list. Trackers for the S&P 500 index have also been popular in the period. But savvy investors have profited from picking the active fund, with the Baillie Gifford fund returning 54% during the past six months compared to the 2.9% return of the index. The fund’s concentrated positions in stocks such as Amazon, Tesla and Netflix have paid off over this time.

“Sitting in the sweet spot of a combination of both US stocks and a focus on technology means that Scottish Mortgage has shone during the current crisis. A perennial favourite among investors, the FTSE 100 listed trust has returned 41% during the past six months helped by stakes in companies that have profited during the crisis, such as Amazon or Alphabet.

“Investors have also been looking to nab bargains in the market turmoil over the past six months – with a couple of ‘Special Situations’ funds making the most bought list: Jupiter UK Special Situations and Fidelity Global Special Situations. These ‘value’ strategies aim to pinpoint unfairly discounted stocks and buy them at bargain prices before they rebound – clearly a strategy that investors think will work well in the current environment, where markets have dragged down a number of solid stocks.

“The most popular shares list doesn’t look dramatically different to usual months, with investors still putting their money with large, household names. However, many will have used the market turmoil to buy these popular stocks at cheaper prices and hopefully benefit from the rebound. 

“A number of the companies were hit hard in the worst of the downturn, such as EasyJet, Shell and International Consolidated Airlines. Many are also still underwater, Lloyds for example has been painful for investors and is still down 50% across the past six months, while Royal Dutch Shell is down 43% and BT is down more than 40%. Investors will be hoping that once lockdown rules ease and life returns to normal, these stocks will rebound.”

The most popular investments on AJ Bell Youinvest: