The unloved UK will once again have its day. Our 11-strong panel of experts share their growth, income and wildcard tips.
- More expert tips:
- Bond, property and multi-asset tips for 2020
- Global fund and trust tips for 2020
- Specialist fund and trust tips for 2020
- Regional fund and trust tips for 2020
- UK share tips: six ‘value’ stocks for 2020
- Six ‘speculative’ share ideas at the start of 2020
L&G UK Mid Cap Index Fund
TR 1 year 15.8%, 3 years n/a*, yield n/a
Our fund panellists opted to shy away from recommending UK growth funds with either a strong focus to large companies or a bias to the more internationally geared UK-listed companies. Instead they contend that investors will be more likely to find that value lies outside the FTSE 100 index, in businesses that exhibit a greater domestic bias.
Mick Gilligan, head of fund research at investment management firm Killik, prefers a passive route to profits from this mar- ket area. He notes: “This part of the market remains under a ‘Brexit cloud’ and any clarity on the issue in 2020 is likely to see a decent relief rally for the FTSE 250 index.”
Fund factsheet: L&G UK Mid Cap Index Fund
JPMorgan Smaller Companies IT
SPTR 1 year 34.5%, 3 years 84.0%, yield 1.9%
Following similar lines to 2019’s tips, none of our investment trust panellists put for- ward a UK-focused trust that invests across large, mid and small caps. Instead, specialist small-cap trusts are favoured, with John Newlands, founder of Newlands Fund Research, describing JPMorgan Smaller Companies IT, also tipped by our panellists last year, as “a top-drawer investment trust, which holds a broad range of overlooked companies.” The double-digit discount also catches the eye. It has among the best three- year returns of UK investment trusts.
Fund factsheet: JPMorgan Smaller Companies IT
Franklin Templeton UK Equity Income
TR 1 year 14.3%, 3 years 24.8%, yield 4.7%
Colin Morton has been at the helm of this fund for 25 years, yet it does tend to slip under the radar despite strong performance over various time frames. Ben Yearsley of Shore Financial Planning describes it as “a core equity income fund that invests pre- dominately in larger companies”.
The 10 largest holdings contain most of the big dividend payers that generate the bulk of the income generated by the UK market as a whole, with BP and Royal Dutch Shell the top two positions. The fund is cheaper than most rivals, with an ongoing charges figure of 0.52%.
Fund factsheet: Franklin Templeton UK Equity Income
Invesco Perpetual UK Smaller Companies IT
SPTR 1 year 31.7%, 3 years 63.2%, yield 3.3%
An unusual choice for income at first glance, given the area of the UK market the trust invests in. But its 3.3% yield, which is financed partly from capital, provides a nice cushion for investors. Under manager Jonathan Brown it has achieved among the best five-year net asset value total returns of UK investment trusts.
Philippa Maffioli, senior adviser at investment manager Blyth-Richmond, is a long-standing fan. She says: “The managers look for financially strong companies with a competitive advantage and use diversification to moderate risk.”
A Money Observer Rated Fund 2020
Fund factsheet: Invesco Perpetual UK Smaller Companies IT
TR 1 year 0.4%, 3 years 18.5%, yield 4.4%
If you’re looking to gain exposure to large, higher-yielding UK companies, this fund could be right up your street, but don’t expect a smooth ride.
Managers Kevin Murphy and Nick Kirrage are value investors, and unlike many of their large companies peers are willing to invest in companies that have cut their dividend payments. Liontrust’s John Husselbee notes: “We maintain a value tilt on our port- folios. This fund is one of the few genuinely contrarian value offerings in UK space, with the benefit of an attractive yield.”
A Money Observer Rated Fund 2020
Fund factsheet: Schroder Income
Artemis Alpha Trust
SPTR 1 year 15.2%, 3 years 44.1%, yield 1.3%
This trust is a poor performer on a 10-year view, with net asset value total returns over that time frame drastically behind the FTSE All-Share index.
Over the past three years, though, performance has improved, and with a new co-manager added into the mix (Kartik Kumar in May 2018) and a large discount, the trust has become a more interesting prospect, argues Charles Macdonald of Rossie House Investment Management. The portfolio has become more compact since Kumar came on board, with much more exposure to large and mid-caps, while the exposure to unquoted shares has been greatly reduced. “It is a good UK specialist opportunity,” says Macdonald.
Fund factsheet: Artemis Alpha Trust
Notes: (SP)TR = (share price) total return. All performance data Morningstar, as at 1 December 2019. *Insufficient track record.
Our fund and trust tips panellists
Our fund experts:
Ben Yearsley is a director at Shore Financial Planning. He formerly worked at Charles Stanley Direct and Hargreaves Lansdown.
Kelly Prior is an investment manager in BMO Global Asset Management’s multi-manager team, which is headed up by Rob Burdett and Gary Potter.
Mick Gilligan joined Killik & Co in 2001 and became a partner in 2004. He specialises in fund research.
John Husselbee is head of the Liontrust multi-asset team. He has more than 25 years’ experience in managing multi-asset portfolios.
Brian Dennehy is managing director at advisory firm Dennehy Weller. He also runs FundExpert, which provides research and insights for self-directed investors.
Victoria Hasler is head of research at Square Mile. Before joining Square Mile, Victoria worked for a Brewin Dolphin as a fund analyst.
Our trust experts:
Tim Cockerill is investment director at wealth manager Rowan Dartington, which is part of St James’s Place.
John Newlands was head of investment companies research at Brewin Dolphin. He now runs Newlands Fund Research.
Peter Hewitt has managed the BMO (formerly F&C) Portfolio trusts since 2008. He joined F&C in 1999.
Charles MacDonald is a partner at Rossie House Investment Management, which favours trusts for private client portfolios.
Philippa Maffioli joined Blyth-Richmond Investment Managers in 2001. She works with her father, who founded the business.