Global growth funds, Indian equities and tech were all popular with Sipp investors in January, according to the latest data from investment platform Hargreaves Lansdown.
The Jupiter India fund (JUPINXA) was one of the most popular Sipp investments made by Hargreaves Lansdown customers, coming in as the most popular fund overall for Sipp and drawdown investors using the platform.
This is perhaps unsurprising, given the strong performance the fund has seen. It returned 31.12% in 2023 and has continued this trend into the new year, with Morningstar ranking it the top performing fund in January.
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This reflects the broader market backdrop, with Indian equity markets having performed well over the last year. Many believe this is set to continue.
With global growth funds and tech (a growth-oriented sector) also featuring heavily in HL’s top ten, it seems pension investors are optimistic about the outlook for global economic growth.
“The trades in part are reflective of the mixed start to 2024 for markets”, according to Emma Wall, head of investment analysis and research at HL.
“[T]hough both the Federal Reserve and the Bank of England have voted to hold rates in recent weeks, [...] US stocks managed modest gains in the first month of the year, and economic data was broadly positive”, she added.
| Top Funds in HL Sipps, January 2024 (net buys) | Top Funds in HL Sipp drawdown, January 2024 (net buys) |
|---|---|
| Jupiter India | Jupiter India |
| Fidelity Global Dividend | Fidelity Global Dividend |
| Royal London Short Term Money Market | Royal London Short Term Money Market |
| Artemis Income | Artemis Income |
| Artemis Corporate Bond | Artemis Corporate Bond |
| Fidelity Cash | WS Blue Whale Growth |
| Liontrust Global Technology | Fidelity Cash |
| Rathbone Global Opportunities | Liontrust Global Technology |
| WS Blue Whale Growth | Rathbone Global Opportunities |
| Jupiter Asian Income | Artemis High Income |
Growth funds: Are investors right to be optimistic?
The general view held by many investors is that growth funds perform well during bull markets, but underperform other investment styles (such as value investing) during periods of economic recession.
With this in mind, pension investors’ interest in growth funds this January could suggest they expect global economic growth to hold up.
While recessionary fears loomed large in 2023, with many fearing the impact of higher rates on global growth, these now seem to have waned. The latest forecasts from the International Monetary Fund (IMF) suggest global growth will stay at 3.1% in 2024, before rising to 3.2% in 2025.
If the IMF is right, pension investors could be making the right call, seizing the opportunity to add some attractive growth to their portfolios.
Money market funds remain popular - but investors should look elsewhere for better long-term returns
On a slightly different note, money market products were another popular choice with investors in January. This is perhaps unsurprising, as investors look to take advantage of today’s higher interest rate environment while it lasts.
The Bank of England decided to hold the base rate at 5.25% at its February Monetary Policy Committee (MPC) meeting, but markets are already pricing in rate cuts for later this year. As such, the interest you can earn on money market funds has dipped slightly from its peak, but remains high compared to the long-term average.
Despite this, pension investors should exercise a note of caution when adding these products to their portfolio. “Investors should remember that cash has limited long term strategic asset allocation benefits, particularly if you are still in the accumulation stage of your life”, says Wall.
Her advice is to “[p]lump instead for a bond fund, where you can benefit from high yields now, and growth later, or an equity income fund”. She points out that these longer-term investments “offer the potential for income, growth and income growth, if done right”.
Opportunities in the UK market
No UK equity funds featured in HL’s top buys in January. However challenges in the domestic market mean that many UK companies are undervalued, and could present an attractive buying opportunity.
Explaining investors’ decision to shy away from the UK, Wall points to the fact that the FTSE 100 posted losses in January, and inflation lingered.
However, “rather than shun the domestic market, contrarian investors should consider this a great opportunity to buy at depressed prices”, she says.
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