Low-cost index-tracking funds are a popular choice for investors when building their SIPP and ISA portfolios. By tracking the performance of a select index rather than requiring a fund manager to pick investments, passive funds are cheaper to buy, with some costing less than 0.10% a year.
Fidelity Personal Wealth has 15 such funds on its Select 50 best-buy list for investors who want market exposure across a range of different asset classes.
Two UK fund top the list below, with the iShares Core FTSE 100 chosen for large-cap exposure. It tracks the FTSE 100 index which features the largest companies by value listed in London and has an ongoing charges figure (OCF) 0.07%.
“BlackRock is a seasoned investor in passive funds and the fund's costs are low,” the analysts said, noting that the fund would be suitable for cost-conscious, long-term investors.
For mid-caps, however, they went for a Vanguard fund. The Vanguard FTSE 250 UCITS ETF charges 0.10% a year and has a 3.23% yield. It is made up of more domestic names, with top holdings including airline easyJet and infrastructure company Balfour Beatty.
“Vanguard is an expert in index tracking and this fund is well priced,” Fidelity analysts said, noting that the fund would only be appropriate “on the riskier side of a portfolio” as mid-caps can be more volatile and riskier than their larger peers. There was no tracker selected for UK small-caps.
Passive funds in Fidelity’s Select 50
Source: Fidelity
Turning elsewhere, in the US the firm chose two passive funds that track the S&P 500. Vanguard S&P 500 UCITS ETF has an OCF of just 0.07% and offers investors access to major technology names including the Magnificent Seven giants that have dominated returns in the past few years.
However, analysts also selected the L&G S&P 500 US Equal Weight Index, which holds all 500 constituents in equal proportions rather than by market capitalisation.
This means it has less concentrated exposures to the largest companies in the United States compared to traditional passive funds that are weighted by company size.
“For investors who have a long-term horizon, are cost-conscious, and want a less concentrated exposure to the largest companies in the United States, this fund represents a sensible choice on the riskier side of a portfolio,” they said.
Legal & General also got the nod for its global tracker, the L&G Global Equity Index, while Vanguard Global Small-Cap Index was chosen to track stocks lower down the market capitalisation spectrum.
All funds on the list came from one of the three passive providers, with BlackRock’s iShares division chosen for the most on the list above with seven, including the firm’s preferred passive options in Japan, Asia and among its alternatives.
Vanguard had five while Legal & General accounted for three funds on the list.