The 12 funds most recommended by investment platforms

UK investors have almost 5,000 collective investments to choose from, including around 4,500 open-ended funds and exchange traded funds (ETFs), plus nearly 400 investment trusts. But if the time you have to spend on researching investments is limited, it's probably way too much choice. So investment platforms try to help by whittling down this massive universe to much shorter suggested lists of 50 to 100 funds.

Platforms select the funds on their lists using the skills of internal or external analysts, looking at past performance, fund managers’ style and track record, costs and charges. They offer no guarantees that these handpicked investments will prove to be winners or that they will avoid the losers. And the concept of ‘best buys’ isn't without controversy, for example Hargreaves Lansdown (HL.) recommended LF Woodford Equity Income Fund right up until its demise.

However, the Financial Conduct Authority (FCA) has taken the view that best buy lists have an important role to play in guiding consumers’ investment choices. So if you agree with the regulator, it makes sense to look at these lists as a whole, combining the intellectual might of the platforms’ research capabilities to see where they agree and disagree. And if some funds, investment trusts and ETFs are just so outstanding that they are universally recommended, perhaps consider buying or at least putting them on your watchlist.

Methodology

I looked at the recommended lists of seven investment platforms used by private investors: Hargreaves Lansdown, interactive investor, AJ Bell (AJB), Fidelity, Charles Stanley Direct, Barclays Smart Investor and Bestinvest. In total, they recommend 390 funds, but none of these received blanket recommendations across all the platforms.

The most recommended fund across the seven platforms is BlackRock Continental European Income (GB00B3Y7MQ71), with only Fidelity not including it on its recommended list. In second place is Fidelity Index World (GB00BJS8SJ34) with five recommendations.

Twelve funds have at least four platform recommendations and cover a good range of geographies and include a gold fund. But there are no bond funds, so you have to consider funds that get three recommendations to find one of these. These are Artemis Corporate Bond (GB00BKPWGV34), Jupiter Strategic Bond (GB00BN8T5596), M&G Emerging Markets Bond (GB00B4TL2D89), M&G Global Macro Bond (GB00B78PH601) and Rathbone Ethical Bond (GB00B7FQJT36).

Thirty-one funds in total are recommended by three platforms and 79 by two platforms.

The top dozen funds are also short on investment trusts, with only Scottish Mortgage Investment Trust (SMT) making an appearance, although Fidelity Special Values (FSV) and TR Property Investment Trust (TRY) each have three recommendations.

The 12 most recommended funds

BlackRock Continental European Income

Interactive investor says: “The managers seek to invest in quality companies with sustainable and growing dividends. Quality is defined as businesses that have strong corporate governance, a strong competitive position and financial discipline, as well as earnings stability. The portfolio is constructed with a degree of pragmatism, tilting it towards either stocks featuring above-average dividends or stocks growing their dividends, depending on the opportunity set and expected risk/reward. The fund’s quality bias and style-agnostic approach mean that returns differ from most equity income peers, which tend to have a value bias. The managers' approach, however, has led the fund to have a steadier return profile and to outperform during periods of market weakness, with strong risk-adjusted returns when compared to both peers and the benchmark.”

Fidelity Index World

Hargreaves Lansdown says: “The fund has tracked the developed global stock market very closely since it launched in 2012. Sometimes the fund has fallen slightly behind, and at other times it’s even been slightly ahead, although investors shouldn’t count on the latter happening. Over the long term, though, it’s done its job well. By tracking the whole of the developed world stock market, this fund provides exposure to lots of different countries and companies. That means it could be a useful option for adding international diversification to a more UK-focused portfolio or a simple way to form the equity foundation of a portfolio. The fund can use derivatives to help [it] invest, which adds risk if used.”

BlackRock European Dynamic (GB00BCZRNN30)

AJ Bell says: “The fund benefits from a well-defined investment process that has been in place for many years. The fund manager has a wealth of experience that has seen many different investment environments and benefits from wider support from an experienced team of investors around him. The flexible approach to portfolio construction that allows a focus on only the best ideas from the team is also a key [feature] of the fund.”

Brown Advisory US Sustainable Growth (IE00BF1T6V32)

Charles Stanley Direct says: “The equity securities in which the fund invests are screened based on certain socially responsible investing criteria in accordance with various principles set out in declarations and conventions signed by the international community, including, but not limited to, the 10 United Nations Global Compact Principles, whose purpose is to increase awareness of a sustainable global economy at company level. Equity securities issued by companies violating such principles and not addressing such violations adequately will not be included in the fund’s portfolio.”

Fidelity Global Dividend (GB00B7778087)

Hargreaves Lansdown says: “Daniel Roberts’ unconstrained approach allows him to invest anywhere in the world, but he tends to favour large companies from developed markets. He won’t compromise on quality and is mindful of valuation. Fidelity Global Dividend could provide international diversification to an income-focused portfolio and work well alongside ‘growth’-orientated funds. We like the manager’s sensible, valuation-conscious approach, which focuses on capital preservation.”

iShares Core FTSE 100 UCITS ETF (CUKX)

AJ Bell says: “This ETF, tracking the FTSE 100 Index, is a very cost effective method of gaining exposure to the largest companies in the UK. The investment objective of this fund is to provide investors with a total return, taking into account both capital and income returns, which reflects the return of the FTSE 100 Index. In order to achieve this investment objective, the investment policy of the fund is to invest in a portfolio of equity securities that as far as possible and practicable consist of the component securities of the FTSE 100 Index.”

iShares Japan Equity Index (GB00B6QQ9X96)

Hargreaves Lansdown says: “The fund has tracked the FTSE Japan Index well since launch in July 2005. It has tracked the index very closely over shorter periods, although over the long run, it’s fallen behind the benchmark due to the costs involved. This is to be expected from an index tracker fund. This fund is an easy way to invest in a range of Japanese companies at low cost.”

iShares Physical Gold ETC (SGLN)

Interactive investor says: “This exchange traded commodity (ETC) aims to track the daily spot price of gold and physically invests in the metal in the same proportion as the value of the ETC. Many commodity funds choose to gain their exposure by buying derivatives, but we like the fact that this option buys gold directly.”

Liontrust UK Growth (GB00B56BDS09)

Fidelity says: “The team is comprised of seasoned UK managers with a clear investment philosophy. They seek to identify companies that possess intangible assets or other durable competitive advantages that will allow them to defy industry competition and sustain a higher than average level of profitability for longer than expected. This is difficult, but the team has done it well over the long term.”

Scottish Mortgage Investment Trust

AJ Bell says: “The longevity of the trust managers involved is useful in providing the consistency, with both having significant experience. However, investors may require patience with the trust given its significant style bias to growth as the trust is very likely to significantly deviate from index returns. Investors should be aware of the use of unquoted companies, which may increase the associated risks.”

Stewart Investors Asia Pacific Leaders Sustainability (GB0033874768)

Barclays Smart Investor says: “The team is well-resourced and experienced, which is really important when managing a fund that invests across such a diverse universe as Asia. The vast number of meetings the team holds with company management teams is testament to the effort and due diligence that goes into running this fund. The fact they also focus on the downside has helped the fund in the past, by providing protection in difficult markets as it helps to minimise falls.”

Vanguard FTSE Developed Europe ex UK UCITS ETF (VERG)

Fidelity says: “This is an index-tracking fund that invests in companies listed in Europe, excluding the UK. The fund provides broad-based European exposure. Vanguard is an expert in index tracking and this fund is well priced.”