Despite proving popular for much of this year, recent evidence suggests DIY pension investors could be starting to shift away from tech funds after a period of volatility for the sector.
Investment platform Fidelity published a list of the most popular SIPP investments on its platform in August, and not a single tech fund featured in the top 10. This is a marked change from earlier this year.
The platform says: “Tech-focused funds were at the forefront for Fidelity ISA and SIPP investors for much of the year, with the Legal & General Global Technology Index Trust a consistent top 10 best-seller. However, August has painted a different picture as investor enthusiasm cooled notably, with a move towards more diversified and defensive assets.”
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It comes after Big Tech experienced a big sell-off over the summer, as well as an underwhelming results season overall. In some cases, investors are starting to question whether the hype around the AI boom has been overdone. Companies are pouring large amounts of capital into their AI capabilities, and investors want to see evidence that it will translate into returns further down the line.
Tech darlings like Nvidia have delivered glittering returns in recent years, but the risk now is that investors have come to expect bigger and bigger things. Beating expectations is no longer enough – the company needs to smash them out of the park. Nvidia beat expectations when it announced its latest results in August, but revenues grew at a slower rate than in previous quarters. This was enough to put the share price in the red.
A couple of disappointing economic reports in the US in recent months haven’t helped matters, making investors more bearish. For example, weak labour market data at the start of August prompted fears of a US recession, causing a rout in equity markets globally. Weak manufacturing data just last week also caused US equity markets and Nvidia to fall.
The S&P 500 and Nvidia are still up 17% and 142% respectively year-to-date, but the point is that investors are showing signs of becoming more cautious. “We’re seeing a classic shift towards safety, as investors seeking stability look to preserve capital amid market volatility,” says Tom Stevenson, investment director at Fidelity International.
He adds: “In this shift, money market funds have become very appealing once again, offering liquidity and security. Funds such as the Royal London Short Term Money Market Fund and the Fidelity Cash Fund continue to be popular among Fidelity’s ISA and SIPP investors.”
Most popular SIPP investments
| Top 10 SIPP funds on Fidelity's investment platform |
|---|
| Fidelity Cash Fund |
| Fidelity Index World Fund |
| Legal & General Global Equity Index Fund |
| Fidelity Global Dividend Fund |
| Royal London Short Term Money Market Fund |
| Fidelity Multi-Asset Allocator Growth |
| Vanguard FTSE Global All Cap Index Fund |
| Fidelity Multi Asset Allocator Adventurous Fund |
| Vanguard LifeStrategy Funds ICVC-Vanguard LifeStrategy 60% Equity Fund |
| Fidelity Special Situations Fund |
Source: Fidelity, August 2024.
Other fund ideas for your SIPP
This week is Pensions Awareness Week – a good time to brush up on your pension knowledge and assess whether your finances are in good shape for retirement.
It is never too early to start planning for your golden years. A worrying 24% of Brits have “no idea” how much they have saved into their pension, while 42% admit confusion over how much they will actually need once they start working, according to new research from PensionBee. This poses a real risk that savers will run out of money in old age, particularly now that retirement costs have soared amid the cost-of-living crisis.
A SIPP is a good idea for some savers, for example those who are self-employed and do not have access to auto-enrolment pensions and employer contributions. See our pensions guide for full details.
This Pensions Awareness Week, Emma Wall, head of investment analysis and research at Hargreaves Lansdown, also shares three SIPP ideas for those who want to dabble outside of their “default fund”. She highlights the Legal & General Future World ESG Developed Index, which has returned 20% over the last year to the end of August; the Schroder Asian Alpha Plus, which has returned 10%; and the Troy Trojan, which has returned almost 6.5%.
She says of the L&G fund: “Global equity funds provide a good foundation to an investment portfolio focused on long-term growth. Investing in companies across the globe provides a good level of diversification in a single fund.”
Of the Schroder fund, she adds: “Asian funds are a great way to add diversification to a portfolio that is focused on long-term investing, which makes them ideal for a SIPP. The fund aims to provide growth by investing in larger companies across Asia, based in countries such as Hong Kong, India, and Taiwan.”
Finally, the Troy Trojan fund is a total return fund, and takes a more conservative approach. Wall says funds like this can “help provide modest growth for your investment portfolio over the long-term, and help shelter your money when stock markets fall, but are unlikely to keep up with stock markets when they rise quickly”.
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