Most-bought investments: June 2022

Investors look to diversify away from tech towards alternatives and inflation-busting strategies amid cost-of-living crisis, while passives dominate top fund picks.

The FTSE 100 held its own against global markets in the first half of the year, in relative terms at least. Dividend-paying blue chips such as Lloyds (LSE:LLOY), Legal & General (LSE:LGEN), and Aviva (LSE:AV.) continued to be popular with yield hungry investors.

But commodities also got a look-in as investors sought to diversify away from traditional equities, with Glencore (LSE:GLEN) and Rio Tinto (LSE:RIO) making the June best buys.

Investors often tend to look to commodities in search of uncorrelated assets, but June was far from easy for commodity prices as fears of an economic slowdown cast a shadow.

Unusually, technology specialists were shunned by fund and investment trust investors in June, but Tesla (NASDAQ:TSLA) kept some shine and just about made the top 10 amongst direct equity investors.

Investors also tried to keep the faith with the faltering airline industry, with easyJet (LSE:EZJ) and airline engine maker Rolls-Royce (LSE:RR.) both making the top 10.

Funds in more detail

After a torrid first half of the year for markets, it seems the only way was passives for many fund investors in June.

With many ‘star managers’ coming under pressure due to the resurgence of value stocks, Terry Smith’s Fundsmith Equity was the only ‘active’ well-known name in the top 10, albeit in the top spot. Some seven out of the top 10 funds were passives, with only one fund being UK-focused (Vanguard FTSE UK Equity Income Index).

Investors are clearly looking to alternatives as a way of hedging against inflation, and TB Guinness Global Energy and FTF ClearBridge Global Infrastructure Income fund were in ninth and 10th place respectively.

Investment rusts in more detail

Mirroring the funds sector, only one UK generalist made the top 10 – industry stalwart City of London (LSE:CTY). And while tech-focused specialists were very much out of vogue in June, Scottish Mortgage (LSE:SMT), which is well known for its high tech exposure, was still rooted at the top of the investment trust best buy charts.

Meanwhile, alternative energy also features in investment trust land, with Greencoat UK Wind (LSE:UKW) and BlackRock Energy and Resources Income (LSE:BERI) in sixth and ninth position. That’s not to say that traditional commodities were forgotten either – BlackRock World Mining (LSE:BRWM) was number three in the investment trust charts for the fourth month in a row.

One of the most enduring investment trust themes over the year to date has ben the rise in capital preservation strategies that also seek to protect against inflation. Yet again, Capital Gearing (LSE:CGT), Ruffer (LSE:RICA) and Personal Assets (LSE:PNL) were in demand in fourth, fifth and 10th place.

Funds comment

Dzmitry Lipski, Head of Funds research, interactive investor, says: “During the early stages of the pandemic, when uncertainty prevailed, we saw fund investors flock to passives. While we later saw a relief rally, and investors returned to ‘active’ strategies, uncertainty prevails again, with a cost-of-living crisis and recession fears. So, for now at least, fund investors are preferring to look for low cost, dispassionate passives. And given that in volatile markets the impact of charges can be felt all the more, it isn’t an unreasonable strategy.

“That said, there’s plenty of room for active strategies too – as the investment trust sector demonstrates. While capital preservation strategies dominate, and the occasional solace is found in a UK dividend hero, investors are also embracing some higher risk options. Small and medium cap European specialist European Assets (LSE:EAT) is a case in point, although the 9% dividend yield might be a motivator there too. Alternative energy remains another constant, at least for now, with diversification and income the name of the game.”

Market comment: a global relief rally

Richard Hunter, Head of Markets at interactive investor, says: For the UK, there has been a tale of two markets for the half-year. The FTSE 250 index, seen as more domestically focused and therefore a more accurate barometer for the economy, has seen a similar decline to US markets and has dropped by 21% in the year to date. On a relative basis, the FTSE 100 has been a rare beacon of light, having lost 3.5% so far this year, most of which can be offset by an annual dividend yield of 3.6% for the index, on a total return basis. The large exposure of the index to oil and mining stocks has been supportive given general commodity prices, while sterling weakness has also enriched the overseas earnings on which the constituents largely rely. However, as evidenced by another weak opening, volatility and uncertainty unfortunately remain key watchwords.”

Keith Bowman, Senior Equity Analyst, interactive investor says: “Shares for electric vehicle maker Tesla fell by around 11% over the month. As with the wider market, investors continued to fret over a likely slowdown in economic growth and what impact this may have on profits going forward. An announced loss of jobs at the company served to underline those worries.

“Similarly, BP (LSE:BP.) shares fell by almost 11% as those same fears for an economic slowdown or even a recession fed into a fall in the oil price. Glencore and Rio Tinto shares retreated 14% as those same fears also overhung commodity prices.

“easyJet reduced its summer capacity and warned of increased costs as it and the wider travel industry battled challenges including staff shortages. Its shares fell 29% over the month.

“Online clothing and fashion accessory retailer Boohoo (LSE:BOO) reported a fall in quarterly sales. Sales fell 8% for the three months to the end of May to £447 million given tough prior year comparatives. Rival ASOS (LSE:ASC) also cut its annual revenue and profit guidance. Boohoo shares fell by just over a third during June.”

Top 10 most-bought investments on interactive investor in June 2022