Investment companies and a mirror on the wall moment

Mirror mirror on the wall, which is the most popular investment company of them all?” Don’t have a Magic Mirror to hand? Not to worry, have a read of the latest Doceo Insights instead…

ByFrank Buhagiar•

“Mirror mirror on the wall, which is the most popular investment company of them all?” Perhaps what Snow White’s arch nemesis, the Evil Queen, would have been bursting at the seams to ask the Magic Mirror had she been either a) an investment company fund manager or b) the Board Chair of an investment company. But, seeing as she was neither, it’s left to others to ask the question “Which are the most popular investment trusts?” And then to look for an answer. So, with 2023 still relatively fresh in the memory, which were the most popular investment companies.

Ground rules

To lay down first. In the absence of a fully functioning Magic Mirror, popular in whose eyes? Institutions/wealth managers? Retail investors? Or all the above?

For the purposes of this exercise, retail investors get to play the part of the Magic Mirror. That’s because retail is an increasingly important target audience for investment companies, particularly those at the smaller end of the spectrum. Why? Because wealth managers are getting bigger, possibly too big to invest in a large proportion of investment companies. Broker Winterflood touched on this very subject when commenting on last year’s mega-merger between wealth managers Rathbones and Investec Wealth & Investment UK:

“This has created one of the largest discretionary wealth managers in the UK, with £100bn in combined assets under management. As two significant owners of investment trusts, the announcement led to some concerns that there could be forced selling, or at least subdued future demand, if the merger led to the combined entity owning more than 30% of a fund’s shares (the threshold that would normally require a bid to be made under Takeover Panel rules). While this does not appear to have materialised to a significant extent, we note that cost pressures may well lead to more consolidation in the wealth management industry. As a result, we expect an increased focus on larger, more liquid investment trusts from these groups, particularly those with centralised investment propositions, and additional scrutiny on the relevance of sub-scale funds.”

Big wealth managers require big investment companies to invest their clients’ money in. All fine and dandy for investment companies of scale. Not so for the rest of the sector. For those funds deemed sub-scale, new investors may have to be found. One pool of potential buyers that investment companies can target: retail. With individual investors potentially becoming more important to London’s investment companies, this popularity contest will therefore be retail-centric.

A question of definition

For the second year in a row, City of London (CTY) finds itself in top spot. What’s more with a market cap of £2 billion, chances are it remains on the radar of the larger wealth managers. Same is true for most of the names in the table’s top 10. Second-placed JPMorgan Global Growth & Income (JGGI), something of a consolidator within the global equity income sector in recent years – market cap well north of £2 billion; Scottish Mortgage (SMT) in third – market cap of £11 billion; Murray International (MYI) in fifth (£1.5 billion market cap); Alliance (ATST) (£3.3 billion); F&C (FCIT) (£5 billion); and Bankers (BNKR) (£1.2 billion).

To be fair, two of the three non-£1 billion+ top 10ers are not far off joining the billionaire club themselves: fourth-placed Merchants (MRCH) £800 million market cap; while ninth-placed Scottish American (SAIN) is even closer – market cap is just under £900 million.

And £1 billion market caps can be found among those companies occupying the 11 to 20 spots too: BlackRock World Mining (BRWM); Law Debenture (LWBD); Caledonia (CLDN); and Greencoat UK Wind (UKW).

A degree of positive correlation between fund size and number of clicks on the AIC website, it seems. Let’s face it though, scoring highly on the AIC’s page view charts is a good start, but in the words of Tom Cruise in the 1996 film Jerry Maguire…

Show me the money!
For surely the ultimate test of popularity is to see which funds retail investors have been buying the most. Easier said than done, as retail investors typically use different platforms to buy and sell funds. Major platforms such as AJ Bell, Fidelity and ii, for example. Oh, to have a single table that aggregated buying activity across all three platforms so that an overall picture can be formed…

Enter Numis, the fairy godmother in this tale. For the broker has done precisely that: “We seek to give an indication of which Investment Companies (ICs) have consistently featured amongst the most popular ICs on the major retail platforms for which we have information, namely: AJ Bell, Fidelity and ii. We note that this does not consider the relative volumes traded on each platform or over time, rather it is based on the number of appearances on the most bought lists…Every month, for each platform, the top-ranking fund is assigned a score of 10, decreasing to 1 for the 10th ranking fund. The scores have been summed across each month to calculate a total ranking for 2023.” All sounds reasonable.

Before the big reveal though, Numis tantalisingly notes: “Looking across the whole of 2023, there is a significant degree of consistency across the lists and over time. This is to be expected as many investors will have built large positions in specific trusts over many years. It is typically long-established ICs with equity-oriented strategies that dominate the ‘most bought’ lists.” This can be clearly seen in the table below, along with the winner of course…

A final flourish
Winner revealed maybe, but here’s a thought – how many funds in the AIC’s top-20 view list make it into Numis’ table showing the 15 most bought funds?

Answer, a clear majority. In all nine of Numis’ top 15 appear in the AIC’s list:

Scottish Mortgage
City of London
JPMorgan Global Growth & Income
Greencoat UK Wind
F&C IT
BlackRock World Mining
Alliance
Merchants
Murray International
And the similarities don’t stop there. For the top-three names on both lists are also the same: Scottish Mortgage, City of London and JPMorgan Global Growth & Income – although in slightly different order.

Worth also taking a look at the funds that made it into Numis’ top 15 but not the AIC’s top 20:

Fidelity European
Fidelity Special Values
Renewables Infrastructure Group
Fidelity China
Polar Capital Technology
Personal Assets


As can be seen, half of the above funds herald from the Fidelity stable – remember Fidelity, one of the three feeder platforms used by Numis to compile the master list. Certainly, Numis is not surprised: “Fidelity’s list unsurprisingly comprised many of its own trusts, with Fidelity European (ten appearances), Fidelity Special values (nine), and Fidelity China (eight) making multiple appearances…”

Exclude the Fidelity names and both lists have a lot more in common than not. One might even go as far as to say, the two lists (Magic) Mirror each other rather well…

We have a winner. Scottish Mortgage (SMT) may have lost top spot in terms of London’s largest investment company to 3i Group (III) in recent years, but the fund’s long-term track record and philosophy still attracts the retail investor. Bravo Scottish Mortgage!