With less than two weeks to go until the end of the 2016/17 tax year, brokers are rolling out their recommendations as investors embark on the usual scramble to find interesting funds for their Isas.
There is no shortage of macro-economic and big political themes to hook onto this year. One obvious consideration is the emergence of strengthening inflation: it now stands at 2.3 per cent and is expected to continue its upward trajectory over the coming year.
Michelle McGrade at TD Direct Investing has rounded up a selection of funds likely to deliver inflation-beating returns. These include:
The disruptive challenger: Henderson Global Technology
‘The long-term story for investing in technology remains intact. Despite some potential near-term headwinds, such as protectionist policies in the US, Henderson believes the technology sector could outperform global equities over the medium term,’ says McGrade.
The best of British: MFM Slater Growth
‘With an exceptional track record over more than a decade, Slater has topped the list two years in a row. He tends to focus on small and mid-sized companies, gets to know the ones in his portfolio very well before he buys them, and typically holds them for a long time.’
Emerging opportunities: M&G Global Emerging Markets
‘At M&G, fund manager Matthew Vaight likes investing in cheaper companies and is encouraged by their improving capital management trend. Emerging markets are a good portfolio diversifier.’
A sustainable future: Royal London Sustainable Leaders
‘China and the rest of the world are committed to improving the planet, but there is more to it than just the environment – it’s the way we live and work too. Manager Mike Fox and his team identify companies that are run by savvy business people, with the aim of making improvements one way or another for our world.’
The contrarian opportunity: Man GLG Undervalued Assets
‘Henry Dixon buys companies that are cheap, have been forgotten by the markets and have a promising upside. With more government spending promised, his portfolio of mainly UK domestic mid-sized companies, which have been held back in the last few years, have the ability to stage a comeback.’
Hargreaves Lansdown, meanwhile, has been looking at both trust and fund ideas for those seeking a flow of income.
'This fund takes a different tack from most equity income funds because it invests predominantly in medium-sized and smaller companies. This makes it a riskier proposition, but one with greater long-term rewards,’ says senior analyst Laith Khalaf. The fund currently yields 4.4 per cent.
Manager Richard Colwell aims to maintain a core of large, high quality, dividend-paying companies, supplemented with out of favour stocks with higher yields, and companies capable of strong growth and rapidly increasing dividends.’ The fund currently yields 3.9 per cent.
‘Managed by Mark Barnett, this trust currently yields 3.5 per cent and trades on a discount of 6.8 per cent, compared to a three-year average discount of 1.8 per cent. The trust is well-diversified, with exposure to larger and medium-sized companies in the UK, plus some companies listed overseas,’ says Khalaf.
Job Curtis has run this trust since 1991. It currently yields 3.9 per cent and has the enviable record of having increased its dividend for 50 years in a row. The manager likes cash-generative companies with strong balance sheets, but is also driven by value investing instincts with an eye on the macro environment.
Ben Yearsley of Wealth Club is focusing on recommendations with a value bias, explaining that ‘We've had a six-month bull run for value stocks after eight years of growth being in favour’. He adds: ‘I think there is lot more to go in the value rally.’
This investment ‘comes in fund or trust format and is managed by the excellent John Bennett. Along with Japan, Europe remains a very unloved market for a whole variety of well-documented reasons,’ says Yearsley. ‘However, notwithstanding Greek problems, I do think Europe is home to many great companies on cheap valuations. Bennett isn't buying any old value, he is only interested in companies that aren't reliant on external help to turn things around.’
‘A large cap value fund that buys stocks that others are shunning. It is an out-and-out contrarian fund. Financials, iron and steel are some of the biggest positions in the portfolio. I'm a big fan of Japan – it is still one of the cheapest world markets despite the recent strong run. The GLG team led by Stephen Harker is one of the premier teams managing Japanese money.’
Finally, Gavin Haynes, managing director of Whitechurch Securities, picks a handful of choices offering diversification and protection for more cautious investors, maybe feeling nervous about the potential for market falls in the wake of the triggering of Article 50 on Wednesday.
Invesco Perpetual Global Targeted Returns
‘This fund seeks to provide investors with positive investment returns (not guaranteed!) in a variety of market conditions,’ explains Haynes. The fund uses cash as a benchmark, and its target is to deliver a return of cash plus 5 per cent before asset management fees over a rolling three-year period, but with less than half the risk of investing in global equities. ‘The investment areas and financial techniques that the fund is utilising are truly diverse, both in terms of asset classes and globally, ranging from long-only traditional investing in equities/bonds to making calls on currency, inflation, mortality etc. The fund has delivered robust risk-adjusted returns since launch.’
Henderson Cautious Managed
‘Long-term experienced manager Chris Burvill invests in a diversified portfolio of equities (maximum 60 per cent), bonds and cash. Burvill actively allocates between the asset classes according to his views of the economic cycle. This fund was launched back in 2003, and Burvill has an exemplary record within this sector, having also having previously managed the Investec Cautious Managed fund with aplomb,’ says Haynes.
Jupiter Strategic Bond
Haynes describes this as a 'go anywhere' bond fund, meaning that it will invest across the fixed interest spectrum whilst aiming to achieve high income and currently yields 4 per cent. ‘The fund can include high yield bonds, investment grade bonds, government bonds, preference shares, convertible bonds and emerging market bonds. The fund manager, Ariel Bezalel, aims to seek out the best opportunities within the fixed interest universe globally. To achieve this, he looks for situations offering value and good risk/reward positions. This fund is an excellent ‘all-rounder’ with excellent relative returns over the longer-term.’
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