Time to go bargain hunting

Choosing an ISA can come down to which funds have done well. Many investment gurus say this is the wrong approach
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The Independent Online

Choosing an ISA often boils down to scanning the lists of which funds have done well in the past. Many investment gurus argue this is precisely the wrong approach. By the time a fund is doing well, it has already become too expensive. Better to go for the badly performing bargains.

Choosing an ISA often boils down to scanning the lists of which funds have done well in the past. Many investment gurus argue this is precisely the wrong approach. By the time a fund is doing well, it has already become too expensive. Better to go for the badly performing bargains.

Whatever your investment philosophy, it's interesting to see where people put their money in the last tax year. According to a survey published this week, Fidelity was the largest provider of managed stock & share ISAs with sales of £909m, just beating Jupiter which achieved £885m. Aberdeen was the star of the year based on its relatively modest position in the PEP market. Much of this was down to interest in its technology fund and a successful advertising campaign.

BEST Investment, a firm of investment advisers, surveyed 64 ISA managers, and found that total managed stock & share ISA sales stood at £11.5bn. This includes unit trusts, investment trusts, OEICs and protected ISAs, but does not include self-select plans. This market was split between 89 per cent in Maxi ISAs and 11 per cent in Mini ISAs. "This is a very concentrated market. The top ten players account for 58 per cent of all managed stock and shares ISA sales", says Jason Hollands, an analyst with BEST Investment. "Long term this is probably bad news for innovation in the market."

Perpetual has fallen steeply from its strong position in the PEP business, which, according to Best, is "a price to pay for its avoidance of many high growth technology and telecom stocks in a year dominated by TMT mania".

Whilst some groups have been boasting a bumper year, others have seen a substantial erosion of their tax wrapper business as the market concentrates around the major players.

Who provided the ISA funds in the first place? According to Best, 53 per cent came from fund management companies, 22 per cent from the high street banks and building societies, 23 per cent from life offices and just 2 per cent from other sources.

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