Our quarterly multi-manager series reveals the regions, sectors, funds and trusts currently favoured by a panel of leading collective investment specialists. Rather than build their portfolios by investing in individual stocks or bonds, these managers invest largely or exclusively in investment funds and trusts, leaving them well-placed to identify likely future winners.
The steep sell-offs seen throughout global markets at the beginning of the year have sent our managers in very different directions. For some, the volatility has underlined the need to focus on capital preservation, so they are drawn to fixed income and gold as well as property and well-diversified global equity funds.
One manager has chosen an emerging market debt fund, suggesting that now may be the time to get into that bombed-out asset class.
Ayesha Akbar, Fidelity Solutions
Ayesha Akbar, portfolio manager in Fidelity Worldwide Investment's multi-manager team, believes there are reasons to be positive about global markets in 2016, citing signs of stabilisation in China and continuing growth across developed markets.
She adds: 'For long-term investors, global equities are an important asset class, offering the greatest potential for capital growth and strong diversification benefits.'
'This supports the fund's ability to make quick but informed buy and sell calls, while manager James Thomson has a strong track record,' she says. Thomson invests in growth companies that are undervalued but have entrepreneurial management and strong competitive positions, which Akbar likes.
Her second choice is also a European fund. 'After several years of austerity, the fiscal stance of European governments is beginning to ease, while the continent is benefiting from a weak currency in terms of exports and low inflation, boosting consumer demand,' she says.
She likes FP Crux European Special Situations, which invests across the eurozone and the wider continent. 'It typically holds companies that operate in niche markets and have high barriers to entry. Short-term performance can be volatile, but the long-term track record speaks for itself,' says Akbar.
With equity markets remaining volatile, Akbar observes that investors may be looking for 'safe havens' such as gold. For them she picks out BlackRock Gold and General as promising.
'The fund aims to outperform the FTSE Gold Mines index and focuses on identifying companies that are mispriced relative to market perceptions. Risk management is an integral part of the process, and the fund's emphasis on liquidity leads it to focus on larger companies in the sector,' she says.
David Hambidge, Premier
David Hambidge, head of multi-asset investment at Premier Asset Management, says he and his team have been advocates of UK commercial property for some time.
However, following 'exceptional' performance from the asset class in recent years, he says he now expects returns to 'moderate'. Nonetheless, he insists that the asset class remains attractive, with good demand and rental growth in a number of regions.
With the prime central London end of the commercial property market looking expensive, Hambidge says he favours good 'secondary' commercial buildings, where some value remains.
He favours Threadneedle UK Property, as the fund is well-diversified across a number of sectors and regions, and offers a relatively high income return (4.2 per cent).
For Hambidge, Japan remains a strong choice for 2016, despite already having delivered 'stellar' returns last year.
'We believe there is still more to be played out in Japan, as the direction of the economy remains positive and the market is supported by firm corporate earnings growth, while on a relative basis, valuations still look reasonable,' he says.
He highlights the merits of Lindsell Train Japanese Equity, a Money Observer Rated Fund 'Experienced manager Michael Lindsell runs it with high conviction, investing in companies across the market-cap spectrum that appear structurally undervalued and have the ability to steadily improve over time.
'The resulting portfolio consists of high-quality assets that the manager intends to hold for a long time,' he says.
Hambidge remains 'unexcited' about the US market on valuation grounds, despite its dominance in global equity markets. However, for those interested in building exposure, he likes Natixis Harris Associates Concentrated US Equity.
'The team's strategy is driven by valuation. It focuses on picking companies that inspire confidence, and runs a concentrated portfolio while paying little attention to the benchmark,' he says.
David Coombs, Rathbones
This year's global market turmoil has prompted David Coombs, head of multi-asset investments at Rathbone Unit Trust Management, to look at bond funds. His first pick is Money Observer Rated Fund M&G Global Macro Bond, which he says offers returns that are unrelated to major stock markets or sovereign debt.
Coombs says: 'Manager Jim Leaviss has been at the helm since the go-anywhere fund's launch in October 1999, using macroeconomic trends to post strong returns.
'As the central banks of Europe and Japan continue to unleash more money into their economies, the US is raising interest rates. Such an environment is a perfect hunting ground for Leaviss and his team.'
The manager's second pick is an emerging market debt fund. Coombs says: 'Moving against a consensus can be dangerous, but rewarding if executed with care and discipline. We think investing in emerging market debt right now is in that camp.'
He has bought into the asset class via Ashmore Emerging Markets Short Duration, which he likes for its broad exposure to both sovereign and corporate debt.
Coombs says the team keeps duration low, which means the portfolio is less sensitive to interest rates. Moreover, it only invests in bonds denominated in developed market (hard) currencies.
Continuing the capital preservation theme, Coombs has chosen offshore global multi-asset vehicle Aspect Capital Diversified Trends.
'This is a trend-following fund that can have a negative correlation with "risk-on" assets. This means it should do well when markets are selling off indiscriminately,' he says.
The fund certainly held up in January, when it gained 3 per cent compared with an average loss of 5.5 per cent from the MSCI World index. In 2015 it returned an impressive 8 per cent, compared with 2.6 per cent from the index. Coombs says it could therefore be a good choice for nervous investors.