20 fund and trust tips for 2017
19th January 2017 13:12
by Faith Glasgow from interactive investor
Here, our two panels of experts reveal their investment tips for funds and trusts invested in Europe, the US, Japan, Asia Pacific and emerging markets.
You can find a profile of our panellists at the end of this article.
Europe
FP Crux European Special Situations
Core growth
manager Richard Pease is described as a "safe pair of hands". Pease hunts for good-quality, cash-generative businesses that have an edge over their competitors.
Jason Broomer says: "The fund has a bias towards mid- and small caps, so sometimes its strategy may struggle - such as when markets reward lower-quality, riskier stocks - but we believe the fund will continue to be a stand-out performer over a cycle."
Neptune European Opportunities
Adventurous growth
"This fund is pro-banks, so it will do very well if [ECB president] Mario Draghi's plans work," says Rob Burdett.
The manager has been tilting towards areas of the market he thinks will benefit most from a recovery in Europe. The fund therefore favours cyclical shares rather than defensive names.
Invesco Perpetual European Equity Income
Growing income and growth
Income hunters might look overseas, given the challenges facing the UK. Europe boasts three times as many dividend payers, and Alan Steel suggests 2017 could be a strong year for if value recovers.
"The catalyst may well be rising inflation, which could then lead to interest rates going upwards for the first time in years," says Steel. Manager Stephanie Butcher has recently gone overweight in the out-of-favour oil and gas sector.
JP Morgan European Smaller Companies Trust
Adventurous growth
"Europe may not be the most popular region," says Tim Cockerill, "but the opportunities are significant, especially among the small-cap stocks that fall under the radar of the big investment groups."
gets his nomination because its two longstanding managers are very experienced and have a strong long-term record, yet the trust trades on a discount of%, which is high for its sector. Cockerill warns that it is high risk and will be volatile.
Jupiter European Opportunities Trust
Core growth
Andrew McHattie recommends because it has a high-quality manager and is trading on a much wider discount than usual, following short-term underperformance.
Alexander Darwall has been in charge since 2000. He has assembled a concentrated portfolio of European and UK equities selected for their long-term potential. McHattie expects a relatively swift return to form.
TR European Growth Trust
Adventurous growth
has performed well in the five years since Ollie Beckett took charge, and Jean Matterson believes this can continue.
"There is an interesting mix of firms in the portfolio, spread across industries and countries. The relatively long list of holdings alleviates some of the risks involved in investing in growing medium and smaller companies," she says.
North America
Fidelity Index US
Core growth
Over the years various studies have shown that active managers consistently struggle to gain an edge in the US stockmarket. Even legendary investor Warren Buffett argues against going active, and he has instructed the executors of his will to put his wife's inheritance into a S&P 500 tracker.
John Husselbee and others on our panel advise that for most it is best to "use a low-cost tracker as a core holding" like .
Artemis US Select
Core growth
One of the few US fund managers who has added value over the long term is Cormac Weldon, who according to FE Trustnet has outperformed the sector peer group in eight of the past 10 years. Just over a year ago Weldon moved from Threadneedle to Artemis.
Rob Burdett is a fan of the manager and says has "got off to a good start". It holds a number of technology names, including , and .
Schroder US Smaller Companies
Adventurous growth
To beat the highly efficient US stockmarket, fund managers have to do something different, which is why a small-cap style is worth considering.
Brian Dennehy says is "the most consistent among its rivals". Steel is also a fan, arguing that the fund is positioned to benefit from president-elect Donald Trump's big infrastructure spending plans.
Japan
Man GLG Japan Core Alpha
Adventurous growth
Investing in Japan requires the patience of a saint, says Husselbee, which is why investors should look towards a value-style strategy. "Backing value gives investors better clues to potential entry and exit points," he adds.
Dennehy also tips , due to its "great long-term track record" as a result of "taking some big bets that paid off". Manager Stephen Harker has been running the fund for more than a decade.
CC Japan Income & Growth Trust
Income and growth
Japan's economic prospects may look uninspiring, but Alan Borrows sees an opportunity to capitalise on improving corporate practices in Japan. CC stands for Coupland Cardiff, a long-established specialist in Asian and Japanese investments.
The , its first, focuses on firms that are being run more efficiently and growing their dividends. Borrows likes the trust's concentrated portfolio, high active share and attractive yield.
Baillie Gifford Japan Trust
Core growth
Jean Matterson gives a similar reason for favouring the region. "Rather than look at Japan's macro prospects, we are enthralled at the company level.
"Managers have woken up to what drives the ratings of their companies, and are far more focused on improving profitability and increasing dividends," she says.
has a formidable long-term record and, unusually, trades at a discount.
Asia Pacific
Stewart Investors Asia Pacific Leaders
Core growth
Our panel found it hard to look beyond this solid choice for core exposure to Asia. has new managers.
However, Alan Steel says: "The wisdom passed on to the new managers [by former managers Angus Tulloch and Jonathan Asante] should reverberate for years to come."
The fund has protected itself well on the downside over the years, due to its focus on high-quality stocks.
Edinburgh Dragon Trust
Growth
Tim Cockerill hopes Aberdeen's value-oriented style will come back into its own over the next few years.
He says: "The investment cycle seems to be moving towards Aberdeen's approach, and with Asia, emerging markets and commodities all bouncing in 2016, the fund has bounced too." If this trend continues in 2017, shareholders in should enjoy a good year.
Aberdeen Asian Income Trust
Income and growth
Aberdeen's Asian team has endured a difficult three years, but long-term record is good. Borrows says its focus on high-quality companies with good corporate governance at reasonable valuations is "exactly what we look for".
He notes that it has consistently raised its dividend. John Newlands says its low-cost gearing could help it to do well "should the Asian story resume its upward trajectory".
Fiedlity Asian Values Trust
Adventurous growth
Peter Hewitt says fears that Donald Trump's election victory will lead to rising tariffs and a strengthening US dollar have led to a sell-off in Asia, which leaves the region looking interesting.
, a mid- to small-cap specialist, has performed strongly. It has a widely diversified portfolio and minimal gearing.
Emerging markets
Baillie Gifford Emerging Market Growth
Core growth
Over the past year performance has slipped, but Brian Dennehy describes this as a blip.
"It has a consistent above-average track record over shorter and long periods," he says. More than a third of the fund's assets are held in China.
JPM Emerging Markets Income
Growing income and growth
is lower-risk and more defensively oriented than other emerging market equity funds.
Jason Broomer says: "The manager favours sustainable businesses that pay attractive yields or have strong dividend growth prospects. The fund is expected to be more resilient in falling markets."
Utilico Emerging Markets Trust
Income and growth
Trump's election has knocked confidence in the emerging markets recovery, but Peter Hewitt believes remains attractive.
The trust invests in utility-type companies, which he expects to prove less volatile than other emerging market stocks.
BlackRock Frontiers Trust
Adventurous growth and income
If you want something largely uncorrelated with other equity markets, frontier markets fit the bill, says Andrew McHattie.
" goes where few others venture, but its diverse spread of investments means it is far less volatile than you might imagine. Performance lagged mainstream emerging markets in 2016, but leads over five years."
Meet our fund panellists
Robert Burdett
Robert Burdett began managing funds of funds at Rothschild and then Credit Suisse. In 2007 he joined Thames River to help set up its multi-manager business, later taken over by F&C.
Brian Dennehy
Brian Dennehy is managing director of advisory firm Dennehy Weller. In 2012 he launched FundExpert, a fund platform for self-directed investors looking for fund research.
Mick Gilligan
Mick Gilligan is a partner in private client stockbroker Killik & Co. He is currently head of research. He analyses funds and trusts and manages the firm's multi-manager portfolio service.
Jason Broomer
Jason Broomer has more than two decades' experience in fund research and running portfolios for private clients. He runs Square Mile's managed portfolio service.
John Husselbee
John Husselbee is head of the Liontrust multi-asset team. He has 25 years of experience in managing multi-manager portfolios, including at Henderson and Rothschild.
Alan Steel
Alan Steel became an IFA in 1973, and launched his firm Alan Steel Asset Management in 1975. It now advises over 2,000 families, with more than £1 billion under management.
Meet our investment trust panellists
Alan Borrows
Alan Borrows is a senior fund manager at Liverpool-based Seneca Investment Managers, which favours a value-oriented approach to multi-asset investment.
Jean Matterson
Jean Matterson is a partner at Edinburgh-based Rossie House Investment Management, which has long favoured investment trusts for private client portfolios.
John Newlands
John Newlands has overall responsibility for investment trust research at Brewin Dolphin. It has £33 billion under management, of which over £4 billion is in investment trusts.
Tim Cockerill
Tim Cockerill is investment director of Bristol-based Rowan Dartington which has client assets in excess of £1 billion. Investment trusts have featured in its portfolios for many years.
Andrew McHattie
Andrew McHattie runs The McHattie Group, an authorised firm which publishes a specialist investment newsletter. He has been the editor of Investment Trust Newsletter since 1966.
Peter Hewitt
Peter Hewitt has run the F&C Managed Portfolio trust since 2008, having managed its forerunner, F&C Managed Portfolio Service, since 2002. He previously worked at Ivory & Sime.
This article was originally published in our sister magazine Money Observer. Click here to subscribe.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.