Terry Smith’s £23bn fund falls out of favour after Magnificent Seven misstep
Terry Smith’s £23bn equity fund has once again fallen off a list of the UK’s most-bought investment vehicles after failing to cash in on the performance of the ‘Magnificent Seven’ tech stocks, new analysis suggests.
The Magnificent Seven refers to a group of US tech giants, including Alphabet, Meta and Nividia, that have seen stratospheric growth in recent years. While Smith counts Meta, Microsoft and Alphabet among his top-ten shareholdings, he has failed to capitalise in the same way as some peers.
“[Terry] Smith, like many other stock pickers, has been facing into the performance headwind of being ‘underweight’ the Magnificent Seven,” said Kyle Caldwell, funds and investment education editor at Interactive Investor, which compiled the list.
“The fund’s fall down our ranking coincides with performance lagging the wider global market over the past couple of years,” Caldwell added.
Smith’s fund is up 15.4 per cent over the last year, compared to a sector average of 20.9 per cent, placing it in the bottom quartile of all global funds.
The other casualty of October was tech funds, with Allianz Technology joining Polar Capital Technology in falling out of the top 10.
While previously popular with investors, investors appear to be fretting that the growth of the Magnificent Seven might be waning.
“It shows how some investors are becoming slightly more cautious on the technology sector and are looking to cast their nets wider to take advantage of other opportunities,” said Caldwell.
Only two actively managed funds are now left in the top 10, with Royal London Short Term Money Market taking second and Jupiter India snagging fourth.
Looking to the most popular stocks, and a four per cent drop in BP shares helped tempt in investors and made the stock the most bought, Interactive Investor said.
Meanwhile, Tesla’s forecast-beating results and optimistic projections for next year pushed the electric car manufacturer back onto the most-bought list.
“Elsewhere, disappointing vaccine sales for pharma GSK offset forecast beating profits, offering a potential discounted buying opportunity, while dividend yields of over seven per cent at life assurers Aviva and Legal & General continued to attract investor interest,” said Keith Bowman, equity analyst at Interactive Investor.