Favourite funds update - 27 September 2024

The AJ Bell Favourite funds list is designed to lighten your research load. There are thousands of funds out there – so we’ve narrowed the field by selecting a high-quality shortlist of funds we believe can deliver their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.

What have we changed?

We keep our Favourite funds list under constant review to ensure we have the highest conviction in the selected funds. And we keep an eye open for alternative funds that may have better potential to achieve their objectives, or represent better value. We also look to add new funds to the list, if we feel there are asset classes or areas of the market that our investors aren’t currently provided for.

As a result of this work, we’ve recently made some changes to the trackers on our list.

Added:

• HSBC Global Government Bond ETF XCHGBP
• HSBC Global Aggregate Bond ETF XCHGBP
• Vanguard Global Corporate Bond Index £ Hedged

Why have we made these changes?

The Favourite funds list aims to cover a broad spread of asset classes and regions. This gives investors the building blocks they need to assemble a diversified portfolio.

Currently, the passive side of the list only provides investors with a global aggregate bond ETF as a way to gain global bond exposure. This fund invests in both global investment grade government bonds and corporate bonds within one product – but doesn’t allow investors the flexibility to control the amount of government bonds or corporate bonds they want to own. As such, we felt that expanding the list to include specific global government and global corporate bond products would improve investor choice.

We’ve also added an index fund option, alongside the current ETF selection, for exposure to global aggregate bonds.

Global Government Bonds

The HSBC Global Government Bond ETF XCHGBP tracks the FTSE WGBI Index. This widely used measure of investment grade, global government bonds currently includes over 1,200 issues, representing sovereign bonds from over 20 countries, denominated in a variety of currencies. The fund’s global currency exposure is first hedged back to US dollars in the parent strategy, then the share class we’ve selected, the XCHGBP, operates a sterling hedge to limit the impact of currency fluctuations to sterling-based investors.

The fund has ‘ETF’ within its name, as the Central Bank of Ireland regulations state that ETF must be in the name if there are both listed (ETF) and unlisted (index mutual fund) share classes of the strategy. However, the X class units selected are the unlisted, index fund share class of the parent strategy. The units are accumulation units and don’t pay out income. Although the X class units are relatively new to the market, the older parent strategy of the fund has done a very good job of tracking its benchmark index closely, over a long timeline, for investors. The X class units of this fund, at 0.13% p.a., also represent a marked saving versus the standard retail class units.

HSBC Asset Management is a wholly owned subsidiary of HSBC Holdings PLC (HSBC Group). Headquartered in London, HSBC Group is one of the world's largest banking and financial services organisations, with an international presence in 65 countries in five geographical regions: Europe, Asia, Middle East and North Africa, North America and Latin America. HSBC Asset Management is the investment management arm of the business dedicated to managing AUM of over $700bn globally, for a range of clients, including some of the largest institutional investors in the world, to commercial and corporate clients, financial intermediaries, retail and private banking clients.

Global Corporate Bonds

The Vanguard Global Corporate Bond Index GBP Hedged tracks the Bloomberg Global Aggregate Float Adjusted Corporate Hedged TR Index. This index is a flagship measure of investment grade, global corporate bonds that currently includes over 12,000 issues, representing bonds from over 60 countries, denominated in a variety of currencies. The fund has a global currency exposure, which is hedged back to sterling to limit the impact of currency fluctuations to sterling-based investors. The fund has tracked its benchmark index closely over a long timeline for its investors. It’s also well priced, at 0.18% p.a. We’re adding both income and accumulation unit versions of this fund.

Vanguard are one of the world's largest investment companies. Founded in 1975 by index fund pioneer Jack Bogle, they have a long history and considerable experience of managing passive strategies very efficiently, at low cost. From the beginning, Vanguard have had a radical ownership structure that remains unique in the US asset management industry. The company is owned by its member funds and, ultimately, owned by the underlying fund shareholders. With no outside owners to satisfy, the business can focus squarely on meeting the investment needs of clients, with revenues being used to improve efficiencies and lower costs on their ranges.

Global Aggregate Bonds

The HSBC Global Aggregate Bond ETF XCHGBP tracks the Bloomberg Global Aggregate TR Hedged Index. This is a flagship measure of investment grade, global government and corporate bonds, that currently includes over 10,000 issues, representing bonds from over 28 different currency markets in both developing and emerging market issuers. The fund has a global currency exposure which is first hedged back to US dollars in the parent strategy, then the share class we’ve selected, the XCHGBP, operates a sterling hedge to limit the impact of currency fluctuations to sterling-based investors.

The fund has ‘ETF’ within its name, as the Central Bank of Ireland regulations state that ETF must be in the name if there are both listed (ETF) and unlisted (index mutual fund) share classes of the strategy. However, the X class units selected are the unlisted, index fund share class of the parent strategy. The units are accumulation units and don’t pay out income. Although the X class units are relatively new to the market, the older parent strategy of the fund has done a very good job of tracking its benchmark index closely, over a long timeline, for investors. The X class units of this fund, at 0.10% p.a., also represent a marked saving versus the standard retail class units.

HSBC Asset Management is a wholly owned subsidiary of HSBC Holdings PLC (HSBC Group). Headquartered in London, HSBC Group is one of the world's largest banking and financial services organisations, with an international presence in 65 countries in five geographical regions: Europe, Asia, Middle East and North Africa, North America and Latin America. HSBC Asset Management is the investment management arm of the business dedicated to managing AUM of over $700bn globally, for a range of clients, including some of the largest institutional investors in the world, to commercial and corporate clients, financial intermediaries, retail and private banking clients.