HL pension investors cross the pond for investment ideas

• The US remained a popular area for HL pension investors in May, with technology a particular area of interest.
• Jupiter India is still in the top 5 most popular funds for both SIPP and SIPP drawdown investors.
• Passive funds also remain very popular with both SIPP and SIPP drawdown clients.

Victoria Hasler, head of fund research, Hargreaves Lansdown:

“The US stock market in different guises remained popular with HL pension clients last month. Dedicated US funds, global funds of which the US makes up around 70% of the benchmark, and technology funds which tend to be around 85% invested in the US, dominating the list of the top funds bought by HL SIPP and SIPP drawdown investors. The US market has performed well over the year to date, with the S&P 500 returning 11.4% in sterling terms over the five months to the end of May 2024. This compares to a return from the FTSE All Share index of 8.7%. Technology stocks have also had a good run, although performance between the so-called ‘Magnificent 7’ is now starting to diverge. These markets could all offer good long term growth potential, but investors may want to consider how much total exposure they have to US, and in particular to technology, stocks given the large overlap between the technology, US and global markets.

Passive funds were the go-to choice for both HL SIPP and SIPP drawdown investors, with just three active funds appearing in their top ten list. These were Jupiter India, Fundsmith Equity and Rathbone Global Opportunities. The trend towards passive funds is no surprise, but rather a continuation of something we have been seeing for many years now. These funds have low fees and offer an easy way to access markets such as the US and global equities. They tend to perform best when returns are driven by the biggest companies in the index, as they have been in recent years. At some point this will start to change, and investors should ensure they have active funds in their portfolio in order to benefit when the market returns to a more normal state of returns being driven by a wider variety of companies both big and small.

It was notable that both lists are dominated by equity funds, with no bond funds or other asset classes on the list. This is unsurprising given how strong equity markets have been of late, and of course we don’t know what the investors buying these funds already hold in their portfolios, but it has certainly been some time since fixed income has been in vogue with retail investors. With bond yields so high, however, this could be a mistake – now is an attractive time to add some diversification to a portfolio and gain some welcome income – particularly for those in retirement.”

HL data