Why these are investors’ favourite funds

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In this episode, Kyle is joined by interactive investor’s Sam Benstead to examine key trends among the 50 most-popular funds, investment trusts and exchange-traded funds (ETFs) in the second quarter of 2025. Among topics discussed are the types of funds investors are favouring to ‘own the market’, why interest in US funds is cooling, the investment trust sector attracting income-seeking investors, and how the top 50 has changed compared with a year ago.

The data discussed is from the ii Top 50 Fund Index. Every three months, this index reveals the 50 most-bought collective investments. You can read the latest report here.

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Kyle Caldwell, funds and investment education editor at interactive investor: Hello, and welcome to On The Money, a weekly bite-sized show that aims to help you get the most out of your savings and investments.

In this episode, we’re going to be running through the most popular funds, investment trusts, and exchange-traded funds (ETFs), with interactive investor customers in the second quarter of 2025.

Joining me to provide his expert insights is interactive investor’s Sam Benstead, who alongside myself regularly interviews fund managers and writes lots of news analysis pieces related to funds.

Now, before I bring in Sam, I’ll just briefly explain why a year ago we started covering the top 50 most-bought collective investments each quarter. So, for a long time now, we’ve covered the most-bought funds, investment trusts, and ETFs on a monthly basis, but we separate them.

The thinking was that if we brought all three together, it would provide an interesting league table in terms of the top 50 most-bought funds, investment trusts, and ETFs. So, we’re now publishing this on a quarterly basis.

We put out a PDF report, and it’s always interesting to see over the quarter how the top 50 has changed, which trends have emerged, which funds have climbed up the league table, and which funds have fallen down it.

We base the top 50 on the number of buys rather than volume, and we also strip out regular investing plans. The thinking is that we want to show the active decisions investors are making, whereas if you’re regularly investing, some investors adopt more of a ‘set and forget’ investment approach, which is passive since it’s buy and hold.

So, Sam, we have a treasure trove of data to delve into. In the report, we look at the different regions, sectors, and fund types that are most popular with investors. However, let’s start with the top 10.

Sam, could you run through the rankings and give a brief description of how each fund invests and why it’s popular with our customers?

Sam Benstead, fixed income lead at interactive investor: Sure. So, Royal London Short Term Money Market Y Acc fund was the most popular fund of the last quarter, and we’ve seen that in our monthly reporting, haven’t we. It’s been a very popular strategy.

So, it’s the lower-risk end of the money market fund spectrum, and it aims to provide investors with a cash-like return by investing in bonds about to mature and making use of bank savings tools that professional investors can access. So, very low risk.

It tends to track the return of the Bank of England base rate, and it’s used as a place to park your cash often when you’re waiting for better opportunities, or if you just want to take a very low-risk investment and see your money gradually tick up higher.

It was followed by Vanguard’s S&P 500 UCITS ETFs. So, these funds, they’re just 0.07% to track the S&P 500 index in the US.

The version of the ETF that distributes income, Vanguard S&P 500 UCITS ETF GBP (LSE:VUSA), was in second place, and the version that reinvests any dividend income was in third place, and that stock market ticker is Vanguard S&P 500 ETF USD Acc GBP (LSE:VUAG) for the accumulation ETF.

Next up, we have the iShares Physical Gold ETC GBP (LSE:SGLN), which is a Super 60 fund. So, quite clearly, that just tracks the price of gold, and it’s backed by physical gold bars.

In fifth place was the Vanguard LifeStrategy 80% Equity fund, while Vanguard LifeStrategy 100% Equity fund was in the top 10 too, in ninth place. These are fund of funds managed by Vanguard, and they’re just a package of Vanguard index funds tracking different markets from around the world, stocks and bonds to act as a one-stop shop for investors.

In sixth place was Scottish Mortgage Ord (LSE:SMT). This is the well-known, growth focused investment trust that buys fast-growing and innovative public and private companies across the world. 

Then we had a few trackers as well on the list. So, the HSBC FTSE All-World Index is an all-world tracker fund, so that includes emerging markets. The Vanguard FTSE Glb All Cp Idx £ Acc is another all-world fund.

To round off the list, we have the L&G Global Technology Index trust, which just tracks global technology shares.

Kyle Caldwell: So, in the top 10, there are only two actively managed funds, those that are overseen by professional investors, and they are polar opposites in terms of risk. At the top of the table, you’ve got Royal London Short Term Money Market, and then lower down in the top 10, you’ve got Scottish Mortgage.

Overall, in the top 50, there are 20 active funds and 30 passive funds, which are either index funds or ETFs. I’m sure many listeners are very familiar with these terms, but I wanted to just run through them for those who are a bit newer to investing.

Index funds and ETFs passively track the ups and downs of a particular index, such as a particular stock market like the S&P 500 or the MSCI World Index. Some also track the up and down fortunes of a particular theme, sector, or part of the bond market.

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Sam, could you explain the types of index funds and ETFs that investors are favouring within the top 50? And could you also outline your thoughts on that split? So, in percentage terms, 60% of the top 50 are either index funds or ETFs, and then the other 40% are either funds or investment trusts managed by professional investors.

Sam Benstead: Yes. So, the main theme within the passive funds on our list are that they tend to track stock market indices. So, the S&P 500 is compiled by Standard and Poor’s, and it’s the 500 largest profitable companies in America. The FTSE All-Share is roughly 600 companies in the UK. The MSCI World is about 1,300 of the biggest global businesses from developed markets, and the Nasdaq 100 is the 100 largest shares on the index in America.

So, these are the main places that people want to track, and then fund management groups come in with products, and they compete on fees mainly, but also on how close they can track the index.

For example, Vanguard’s S&P 500 UCITS ETFs charge 0.07%, but actually plenty of ETFs do it cheaper, but one our fund research team really like is the SPDR S&P 500 ETF USD Acc GBP (LSE:SPXL), which costs 0.03%, and that’s on our Super 60 list. For all-world exposure, you have to pay a little bit more. So, the HSBC FTSE All World fund, which is very popular, costs just 0.13%.

So, that’s where most of the passive money is going, tracking those main indices. But, actually, the other theme is that there are passive funds tracking themes themselves. As Kyle mentioned, it doesn’t have to be a main stock market index. It can be a part of the stock market.

Some of the most popular themes we’ve seen investors want to track at the moment are technology shares, and they’re doing that with the L&G Global Technology Index Trust and the iShares S&P 500 Information Technology Sector ETF$Acc GBP (LSE:IITU).

And also defence, so, the VanEck Defense ETF A USD Acc GBP (LSE:DFNG) on there. It's something that we've spoken about on other podcasts, but defence shares are extremely popular at the moment. Particularly in Europe, the governments are committing to spend more on arms and on the military, and that is boosting defence shares.

One other theme I’d highlight is cryptocurrency. So, while UK-based investors can’t own cryptocurrency in ISAs, and there are no products tracking the value of cryptocurrencies that they can put in ISAs, SIPPs and investments accounts, you can actually buy an ETF which owns companies themselves that are linked to the cryptocurrency world. The one that is proving the most popular on our platform is the VanEck Crypto & Blockchain Innovtr ETF A USD GBP (LSE:DAGB).

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And just back to Kyle’s point earlier, that was that 60% of the 50 funds on our list are passive and 40% are active, this doesn’t surprise me at all. It’s a theme we’ve been seeing for a long time, and the Investment Association (IA) data shows that 25% of money now invested by British investors is passive, so we’re ahead of that.

But I think our customers are very switched on, and they’ve seen that lower fees, and broad exposure to different stock markets and themes can be a very effective way of managing your money.

Kyle Caldwell: Completely agree. I can really see the trend towards index funds and ETFs increasing in the coming years as investors seek out a low-cost, simple way to gain a lot of diversification to global markets.

I’ll now turn to active funds. So, in the second quarter of 2025, there were 14 investment trusts and six funds in the ii Top 50 Fund Index. So, compared to a year ago, we’ve seen demand for investment trusts fall. A year ago, there were 20, and now there are 14.

This coincides with the sector being out of favour. For the past couple of years, the average investment trust discount, which is the gap between an investment trust's share price and the value of its underlying investments (known as the net asset value or NAV) has been wider than 10% since 2022. Many investment trusts have been trading on discounts much bigger than 10%.

When discounts stay at a stubbornly wide level for a couple of years, it becomes more difficult to win over new investors as some then think the discount has become entrenched.

This is particularly a problem for smaller-sized investment trusts that fall under the radar or are too small for large investors, such as wealth managers, to buy.

Now, there are several drivers behind the drop in investment trust demand over the past couple of years, but for me, the main one has been higher interest rates. So, higher rates have caused bond yields to increase to attractive levels, and that has led many investors to dial down on risk. One of the areas we’ve seen a lot of investors go into are money market funds. [Such funds] typically pay interest close to the level of UK interest rates.

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UK interest rates are currently 4.25%. So, many investors are thinking they can pick up that level of income. Of course, it’s not guaranteed through a money market fund. [But many might think] why would I want to take the additional risk of potentially earning slightly higher income elsewhere of, say, 5%, 6% or 7% in a fund that’s investing in different investments, which are higher-risk compared to a money market fund?

[Unlike trusts], we've seen ETFs experience an uptick in demand over the past year. There's now 20 in our index, and that's up from 14 a year ago.

For funds, the number in the ii Top 50 Fund Index slightly edged up year on year from four to six.

Sam Benstead: Within these active funds and investment trusts, most are global. So, investors are really drawn to the one-stop shop funds, where a fund manager can pick shares from the US, the UK or Europe. So, they themselves don’t have to go out and find a different fund for a different region.

Some of these popular funds and trusts include Alliance Witan Ord (LSE:ALW), F&C Investment Trust Ord (LSE:FCIT), Fundsmith Equity, Polar Capital Technology Ord (LSE:PCT), Allianz Technology Trust Ord (LSE:ATT), and, of course, Scottish Mortgage. But, actually, we are seeing some quite specialist regional options on the list as well.

I just highlight Jupiter India in there, City of London Ord (LSE:CTY) as well, [which invests] in the UK, and then we’ve got a bunch of renewable energy infrastructure investment trusts, which generally invest in the UK.

Kyle Caldwell: Two of the funds entered the index in the second quarter. I’m going to talk about them a bit later in the podcast, they are Artemis Global Income and Ranmore Global Equity.

As Sam mentioned, investors are generally favouring broad exposure to global markets, whether they are seeking to own the market through an index fund or an ETF, or they’re seeking professional investor expertise through a fund or an investment trust.

In terms of sectors, one that stands out and that investors are viewing as a potential value opportunity at the moment is renewable energy infrastructure investment trusts.

Sam, could you explain why we’ve been seeing greater investor interest in this area, and could you run through the four investment trusts from the sector that are in the Top 50?

Sam Benstead: Yes. So, these four trusts are Greencoat UK Wind (LSE:UKW), NextEnergy Solar Ord (LSE:NESF) fund, Renewables Infrastructure Grp (LSE:TRIG), and SDCL Efficiency Income Trust plc. (LSE:SEIT). Of the four, Greencoat UK Wind is probably the best known. We’ve had the fund manager in our studio for an interview before.

I think the main reason that investors are drawn to these trusts at the moment is that they’re bargain hunting, and taking advantage of low share prices and big discounts to NAV alongside high dividend yields, because that’s just an attractive trade-off at the moment.

If I explain the yields and the discounts on offer, you’ll see why these have been popular. So, Greencoat UK Wind has a yield of 8.2% and is on a 19% discount. Next Energy Solar Fund is on an 11.45% yield and a 23% discount. Renewables Infrastructure Group has an 8.5% yield and a 22% discount, and SDCL Energy Efficiency Income is on an 11% yield and 37.5% discount.

So, those yield figures are backward-looking. It’s based on the past 12 months of dividends, so there’s no guarantee you’ll get that going forwards. But, actually, these renewables infrastructure trusts have been quite good at paying out their dividends. They get predictable returns by selling power back to the grid, they’re often inflation-linked, and whenever we speak to the managers, they talk about how reliable those dividends are, and what a strong investment proposition they have.

But, obviously, no guarantees there, big discounts, but for bargain hunters, I can definitely see the appeal.

Kyle Caldwell: I completely agree, Sam. I think investors are looking at those discounts and dividend yields on offer. Of course, they’re not guaranteed, and it’s really tempting some investors.

As I mentioned earlier, we have seen over the past couple of years some investors dial down on risk as bond yields have risen, which has increased the level of income on offer from safer assets such as bonds and also money market funds.

But now interest rates are starting to fall. On money market funds, you can still get a very good yield, but that yield has been declining and will continue to decline as interest rates fall.

I think there’s now a pretty wide gap between the yields at the safest ends of the market, [such as what] money market funds are offering, and then alternative income areas, which are more higher risk, like renewable energy infrastructure. For the average investment trust in that sector at the moment, the dividend yield is 8.9%.

So, there’s now a pretty wide range between the “safe end” and the higher-risk end, and that’s tempting some investors to look at this alternative income asset class. That’s a sector where we’ve seen greater investor interest.

Now, if you compare the Top 50 index in the second quarter with a year ago, we’ve seen some high-profile fallers. Two active funds that have fallen considerably in the rankings are Fundsmith Equity and Jupiter India.

Sam, what are your thoughts on why both those funds are now in less prominent positions in our index? Just to put the figures on it, in the second quarter of last year, Jupiter India was in seventh place. It's now in 39th, and Fundsmith Equity was also in the top 10 a year ago in eighth place, and it’s now 23rd.

Sam Benstead: Let’s start with Fundsmith. I think it’s clear that performance has been the biggest issue here, and that’s actually driven lots of outflows. So, the past four calendar years, Fundsmith Equity has underperformed the MSCI World benchmark index.

So far this year, it’s down about 2% versus a slight gain for that index. So, it’s looking like five calendar years of underperformance, and people are seeing that and they’re thinking, why am I paying 0.94% for the I units [of the fund] to underperform the index when I can buy a cheap global tracker from as little as 0.1% and do better?

What will happen later? Who knows? Fundsmith still has a very good long-term record, but this year Terry Smith has blamed it on his large position in Novo Nordisk AS ADR (NYSE:NVO), which is the Danish pharmaceutical company, which owns the Ozempic weight-loss drug. So, shares in that company are down about 25% this year and about 50% down from their peak, and that’s been a standing top 10 position for Terry Smith. So, it’s really hurt his overall performance.

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The other factor is the dollar. In his half-yearly letter to investors, Terry Smith said that the dollar weakening about 9% has been a big drag on performance because he owns lots of American shares, about 75%. Because the dollar’s fallen, that means the returns in pounds have fallen as well. He said that was part of the reason for the underperformance but, actually, if you look at the index, it’s also got about 70% invested in dollar assets. For me, it’s not a very good excuse [currency movements] and, actually, the main problem has been stock picking.

Jupiter India is an interesting one. It’s still managed by the same team, and they’ve been very successful over the long run. But for this one, I think it’s more a case of the theme that they invest in going out of favour. Indian equities are just less popular than they were a year ago. A lot of money moves into the sector, and a lot of money is probably moving out now because returns have been less good. Over the past 12 months, this fund is flat. Over three years, it’s up 79%.

Kyle Caldwell: Another trend we’ve been seeing is demand cool for US-focused funds. In the second quarter, we saw the number of US funds decline from seven to five. Two funds that exited our Top 50 were Pershing Square Holdings Ord (LSE:PSH) and Artemis US Smaller Companies. Both are active funds and managed by professional stock pickers. The five US funds that remain in the index are all index funds or ETFs with each giving investors broad exposure to US shares.

It’s important to bear in mind that if you have exposure to, say, a US index fund or an ETF and also have exposure to a global index fund or ETF, there will be a large overlap in terms of holdings. This is because in the global stock market index around 70% is US shares.

Due to this, investors with global exposure already have a sizeable weighting to the US. American shares have become more dominant in global stock markets since, over the past 15 years, they have performed really well and been led higher by technology stocks.

So, increasingly, if you invest globally, it has become more and more a bet on the fortunes of the US equity market continuing to perform well.

With active funds that invest globally, some professional investors do have a large amount of their fund in the US. Some have around the same level as the MSCI World Index, and you may also see a fund manager have a bit more than the MSCI World Index, although it's quite rare to see that.

However, you also see some fund managers going against the crowd by having less exposure to the US than the MSCI World Index. Two of them are new entrants to our Top 50 in the second quarter and I mentioned them both earlier. They are Artemis Global Income and Ranmore Global Equity.

Sam, you looked at the percentage weighting to the US for both those funds. Could you run through those weightings, and detail how both funds invest?

Sam Benstead: Yes. I'll just start by saying that these have been amazing performers over the past decade. They’re top quartile versus peers over five, 10, one, and three years. They’ve been amazing funds, and they’ve done that with not much invested in the US, which is even more impressive. Artemis Global Income is just 25% invested in US shares, and Ranmore Global Equity has 17% in US shares, so significantly less than the index.

In the case of Artemis Global Income, they’re finding the best income opportunities in financials and industrial shares, mainly in Europe, the UK, and Japan. Meanwhile, Ranmore is a deep value fund, and it’s got 43% invested in Asia.

In a recent note to investors, it said that Korean equities, because they are classified as an emerging market still, are being ignored by many global funds, and there are lots of really good value opportunities there.

So, very impressive from both these funds, and it’s been quite a successful strategy, I think, for many holding these alongside a passive fund, which just tracks companies based on their market cap weighting.

Kyle Caldwell:  So, Sam, you mentioned the Ranmore fund has a deep value investment style. For those who are perhaps less familiar with investment styles such as value investing, I'll just give a brief description of what it is.

If you see that a fund invests in value shares, they’re looking for shares that they think are out of favour and potentially mispriced. However, for a fund manager adopting this approach, they don’t just simply hunt for value shares that are looking cheap in terms of their valuations. They’re also looking for, and hoping for, a catalyst to revive an underpriced company’s financial fortunes, and this could [take] the form of a restructuring, refinancing, or a management change.

Sam recently wrote a data piece pointing out that value-focused funds have been faring well in the first half of 2025 on the back of stock market volatility picking up early this year.

Could you pick out some of the value funds you mentioned in the article, Sam, which aren’t in our Top 50 index?

Sam Benstead: Orbis is one fund manager I would highlight. They run the Orbis OEIC Global Equity fund and the Orbis OEIC Global Balanced fund, and Ranmore manager Sean Peche used to actually work there. It’s a very good value investment house, and we had the manager of the Orbis Global Balanced fund, Alec Cutler, in the studio about a month ago to talk through the investment style and where they’re finding opportunities at the moment.

One of the little nuggets of information in there was that he thought defensive shares were still cheap and also that gold had further to run. So, Orbis, a very interesting fund manager that performed very well recently.

• Orbis Global Balanced video: why gold and defence shares will keep rising
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I’d also highlight Brickwood Asset Management. Ben Whitmore is the key manager there, and he used to run about £10 billion at Jupiter in global and UK value equities. He’s split from Jupiter to launch his own fund management firm, and these funds have a track record going back just until February.

So, very new, but if you’re interested in following what he’s up to, I also had him in the studio recently, and he talks through his investment style and what types of companies he likes at the moment.

One other which is also being featured in our video series is the Schroder Global Recovery and Schroder UK Recovery Strategies. The UK manager is Nick Kirrage, and he’s a very interesting value investor.

So, that’s worth a listen or a watch if you’re interested in that style of investing. The final one I would highlight is the Dodge & Cox Worldwide Global Stock fund, and that’s a member of our Super 60 list.

Kyle Caldwell: Sam just mentioned three recent videos that he recorded with fund managers. They’re available on our website and you can also watch them on our YouTube channel.

If you search for interactive investor on YouTube, our channel will come up, and if you subscribe to our channel it's free, so you'll be able to see all the videos that we record with fund managers in the coming months.

That’s it for this episode. My thanks to Sam, and thank you for listening to On the Money.

If you enjoyed it, please follow the show in your podcast app and do tell a friend about it. If you get a chance, please do leave us a review or a rating in your podcast app too.

You can join the conversation, ask questions, and tell us what you'd like to talk about via email, which is OTM@ii.co.uk.

In the meantime, you can find more information and practical pointers on how to get the most out of your investments on the interactive investor website, ii.co.uk. I'll see you next week.

On The Money is an interactive investor (ii) podcast.