Which were the most unpopular sectors this year?

Fund sectors will go in and out of favour due to a whole host of reasons. It could be due to concerns about particular markets or simply a natural cooling off after a period of popularity.

Sometimes areas will be shunned for very good reason – but it’s equally true that investors could be making a huge mistake by failing to give them enough attention.

Here, we reveal some of the worst-selling sectors over the last few months and highlight funds within them that could be worth considering.

IA Targeted Absolute Return

This sector, which is for funds aiming to deliver positive returns in any market conditions, was the worst seller during October in terms of net retail sales*. In fact, it’s suffered outflows in all but one of the first 10 months of 2022, according to the most recent data published by the Investment Association.

However, it contains plenty of attractive funds. The Brooks Macdonald Defensive Capital fund, for example, focuses on long-term capital growth and protection. Its manager, Dr Niall O’Connor, aims to deliver positive absolute returns over rolling three-year periods, in a range of market conditions, with less volatility than equity funds. The aim is to produce a portfolio with predictable performance, courtesy of its exposure to defined return assets. These include convertibles, structured notes, and investment companies.

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IA Global

The IA Global sector is home to funds that invest at least 80% of their assets globally in equities. They must also be diversified by geographic region. It remains the sector with the most assets under management but was the worst seller during September 2022* and has endured steady outflows for much of this year*.

You are certainly spoilt for choice when it comes to decent funds in this area, although their aims and objectives can differ enormously, so you need to do your research. One to consider is GAM Star Disruptive Growth. This is an equity fund that seeks long-term growth opportunities in companies whose business models are driven by new, disruptive technologies. Its manager, Mark Hawtin, and his team insist emotional detachment is critical, with the strategy being founded on “detailed, dispassionate” fundamental analysis to avoid hype.

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The best and worst-selling funds each month in 2022

IA UK All Companies

This is another hugely popular sector with UK-based investors – but it’s also been one of the worst sellers during 2022*. In fact, it’s been the worst seller in four separate months this year, as well as in the first and third quarters*.

The sector is for funds that invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth.

Unsurprisingly, it’s packed full of interesting funds run by talented and knowledgeable managers that have plenty of investment experience.

VT Downing Unique Opportunities is an interesting fund in this sector. Launched in just 2020, it’s a multi-cap UK equity fund run by the highly experienced Rosemary Banyard. Rosemary has spent more than 30 years in the investment industry, as both an analyst and a fund manager, and has a well-defined process looking for companies that have sustained competitive advantages, with low debt and good management teams.

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IA Europe excluding UK

This equity sector is for funds investing at least 80% of their assets into European equities – excluding those from the UK. Along with many equity-focused sectors, it’s experienced strong outflows this year and was officially the worst seller during July 2022*.

This isn’t necessarily a rare scenario as European-focused funds often find themselves overlooked, despite the numerous world class companies that call the region home. The Janus Henderson European Focus fund is an option here. It’s manager, John Bennett, and his team will blend key themes with compelling stock-specific stories in the hope of providing access to sustainable long-term growth trends. The fund will generally invest in a combination of well-known, larger cap names, along with under researched mid-cap companies.

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IA Sterling Corporate Bond

This sector was the worst seller in the second quarter of this year, although it has been experiencing some positive inflows over recent months*. It is for funds investing at least 80% of assets in Sterling denominated (or hedged back to Sterling) corporate bonds.

The BlackRock Corporate Bond fund is a strong contender in this area. It has an experienced manager in Ben Edwards, with the impressive resources of BlackRock at his disposal. Its aim is to provide a return on your investment that’s generated by an increase in the value of the assets it holds, as well as the income they may provide. The investment process combines macroeconomic views on the wider economy with fundamental research carried out on individual companies and their various bonds. Although most of its bonds will be investment grade, the fund does have the flexibility to source ideas from other areas when required.

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*Source: Investment Association, October 2022

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