10 UK fund and trust tips for 2016

We round up some favourite UK-oriented funds and investment trusts from our investment panellists, compiled by Helen Pridham and Fiona Hamilton.


Core growth and income

One aspect of JOHCM UK Dynamic that particularly appeals to Gavin Haynes, managing director of Whitechurch Securities, is that fund manager Alex Saviddes has a clearly defined investment process, focusing on recovery-type stocks that have generated strong risk-adjusted returns over the years.

Haynes says: 'The fund provides value/contrarian UK equity exposure with an income and growth bias, which I believe are strong philosophies to employ.'


Adventurous growth

Consistency is a feature that Brian Dennehy, managing director of advisory firm Dennehy Weller, particularly values; he says Old Mutual UK Mid Cap's track record of outperforming its peers over both longer and more recent periods makes it a winner for him.

Managed by Richard Watts, it invests in a broad range of UK mid-cap companies. Watts adopts a flexible approach, so he can adapt to different economic conditions.


Adventurous growth

Managed by industry veteran Gervais Williams, CF Miton UK Smaller Companies invests in genuinely small companies. Thames River's Robert Burdett is keen because, he says, 'this area is at a rare historical discount to the broader market'.

He also believes smaller companies are less risky at this point of the economic cycle than they are often perceived to be; moreover, 'with careful selection many smaller companies can find profitable niches whatever the economic weather'.


Growing income and growth

There are many UK equity income funds to choose from, but Mick Gilligan, a partner in private stockbroker Killik & Co, is attracted to Majedie UK Income because of the manager's investment process.

He explains: 'It is designed to identify companies undergoing operational improvements, with a valuation that does not reflect the improving prospects. This focus on "self-help" situations means the fund is less reliant on overall market direction.'


Immediate income

Money Observer Rated Fund tickInvestors in search of a high and stable yield should consider an enhanced equity income fund, says John Husselbee, head of Liontrust's multi-asset team. Schroder Income Maximiser takes this approach.

It targets a yield of 7 per cent through a portfolio of high-yield equities. By writing options on these shares, extra income is generated in exchange for giving up some of the potential for capital gains.


Core growth

Smaller UK companies have outperformed larger companies over the long term, and John Newlands, who has overall responsibility for investment trust research at wealth manager Brewin Dolphin, believes BlackRock Throgmorton's two-pronged strategy makes it a excellent way to gain exposure.

'The conventional investment portfolio, which is ably managed by Mike Prentis, is complemented by a long-short strategic overlay, achieved via a sub-portfolio of contracts for difference. Though not an area for the beginner, this is a logical approach and should not put investors off.'


Core growth and income

Money Observer Rated Fund tickPeter Hewitt, manager of F&C Managed Portfolio, and Tim Cockerill, investment director at Rowan Dartington, both opt for Perpetual Income & Growth, managed by Mark Barnett since 1999. Hewitt says that while it may lag a little in roaring bull markets, it is never far off the pace and dividend growth has been strong.

'Barnett favours companies with strong balance sheets and predictable cash flows, does not like cyclicals, and has steadfastly avoided miners and banks.' Cockerill adds that Barnett is supported by an experienced team whose macroeconomic view is critical to the investment process.


Core growth and income

Andrew McHattie, who runs The McHattie Group, prefers Edinburgh IT, also managed by Barnett since he took over from Neil Woodford in January 2014.

'Smaller companies have been the place to be in the UK for the past three years, but faced with possibly tougher conditions in 2016 it seems sensible to head towards the mainstream, and they don't come a lot more mainstream than Edinburgh IT,' McHattie declares.


Core growth and income

Money Observer Rated Fund tickDespite dull returns in 2015, Aberforth Smaller Companies is the preferred route into UK smaller companies for Alan Borrows, a senior fund manager at Liverpool-based Seneca Investment Managers.

'Aberforth Partners is the best-resourced value-oriented manager in the sector,' he says. 'With easy money sloshing around, value investing has struggled, but we are convinced it will work over the long run.'


Adventurous growth and income

Diverse Income Trust, run by Miton, appeals to Jean Matterson, a partner and chief investment officer of Rossie House Investment Management, because manager Gervais Williams looks for companies combining the potential for both capital and income growth, and the trust's multi-cap approach means he has an exceptionally diverse investment universe.

'He has demonstrated his ability to do well in difficult times, and the trust has a put option on the FTSE 100 index, which offers some protection if markets fall,' she says.

Money Observer Rated Fund tickDenotes a 2015 Money Observer Rated Fund.

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