- Investor confidence rose with the stock market in December
- Most bought funds for ISAs, JISAs and LISAs had a distinct growth bias
- Money market funds, which dominated the tables first half of 2023, are almost banished
Emma Wall, Head of Investment Analysis and Research, Hargreaves Lansdown:
“2023 seemed to save the best for last in investment terms. After a year of disparate fortunes and binary trades – large vs small, US vs UK, AI vs – well anything that wasn’t AI – Q4, and in particular December, lifted both the market and the mood.
HL’s Investor Confidence survey revealed a bounce in December, with the UK and Europe featuring the biggest lift in outlook, both up 50%, while Asia Pacific equities saw a 30% increase in confidence compared to November. Our clients even had a continued positive outlook for the US, which rallied 24% last year, with confidence up 20% in American equities. This was reflected in ISA buys at the end of the year, as investors played the momentum trade, buying into rallying markets in the hope of continued gains.
Jupiter India is a prime example of this trade – the most bought fund across all three ISA wrappers. India is ‘top of the pops’ for retail investors looking for emerging markets exposure at the moment – with several India funds and investment trusts featuring in our most bought on the HL platform in recent months. The first half of 2023 was dominated by a binary call – a bar bell approach of money market funds and gilts on one side, tech funds and leveraged US ETFs on the other. But as the Indian stock market began to rise, outpacing most emerging and many developed market peers, retail investors have taken note, piling into the region. While the long-term case for India is compelling, on a price-to-book basis, India is trading above its average over the previous three decades and above emerging markets including China, Taiwan, and Korea.
Tech funds, growth-biased US and global funds feature heavily across the most bought tables all last year but have edged out money market funds in both the ISA and JISA trades, replaced instead with corporate bond funds, and even specialist AI exposure. This is not surprising, given the changes in market sentiment and forward guidance from central banks. While nothing in investing is guaranteed, it seems we are around the top of the rate cycle. We think this is the most interesting entry point for bond investors in decades. There is potential that you are either rewarded with income – from higher-for-longer yields – or growth, as yields fall. Volatility is hard to stomach but can offer opportunities for good quality active fund managers to take advantage of price fluctuations.
Money market funds remain a feature of LISAs – presumably for their capital preservation qualities for those who are using the flexible LISA structure to buy a house, rather than build up a pension pot. If this is not the case, then investors should reconsider. In a falling rate environment, you want bond funds – witness the near three-decade bull run in recent history – and shares, as the falling cost of capital spurs company spending, rather than cash. Dividends can also offer a real yield (potentially higher than inflation) and a boost to total returns.
Add to this, there have been missives from the Bank of England in October encouraging the money market funds sector to hold more liquid assets to cope with market volatility, and an FCA consultation to enhance the resilience of money market funds, working with the Treasury and Bank of England, and our view for retail investors is that more sustainable yield can be found elsewhere.”
Top Funds bought in ISAs, December 2023 (net buys) |
Jupiter India |
Fidelity Global Technology |
Artemis Corporate Bond |
Fidelity Global Dividend |
Royal London Sterling Extra Yield Bond |
Sanlam Global Artificial Intelligence |
Artemis High Income |
Royal London Corporate Bond Trust |
Baillie Gifford American |
Liontrust Global Technology |
Top Funds bought in JISAs, December 2023 (net buys) |
Jupiter India |
Rathbone Global Opportunities |
Fidelity Global Technology |
Sanlam Global Artificial Intelligence |
Baillie Gifford American |
Fundsmith Equity |
CT European Select |
Artemis Income |
Fidelity Global Dividend |
WS Blue Whale Growth |
Top Funds bought in LISAs, December 2023 (net buys) |
Jupiter India |
Royal London Short Term Money Market |
abdrn Sterling Money Market |
Rathbone Global Opportunities |
Vanguard Sterling Short-Term Money Market |
Fidelity UK Smaller Companies |
Fidelity Global Technology |
Janus Henderson Global Technology Leaders |
Fidelity Global Dividend |
Legal & General Cash |
Source: Hargreaves Lansdown