Fill your ISA before tax year end: ii experts share fund ideas

The ISA wrapper remains one of the most effective ways for UK investors to build long-term wealth, allowing investments to grow free from capital gains tax and income tax – especially if investors are savvy about the fees they are paying. With the end of the tax year approaching, ISA investors may consider reviewing their portfolios.

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Below, experts from the fund research team at interactive investor, the UK’s leading flat-fee investment platform, explore core themes from an investment perspective and a range of fund ideas.

Tax year end is a great natural check-in point for your investments, which can be a useful opportunity to reassess portfolio positioning, rebalance exposures, and ensure investments remain aligned with your financial goals.

interactive investor offers a wide range of educational tools and insights to help investors make confident investment decisions, including its Investment Coach tool.

Portfolio construction themes for ISA investors

So, you think you’re diversified?

Tom Bigley from interactive investor’s fund research team, explains: “Global equity markets remain heavily concentrated in a small number of large US growth companies, particularly within the technology sector. For example, the top 10 companies in the S&P 500 account for around 37% of the index. While these businesses continue to benefit from structural trends such as artificial intelligence (AI), the narrow leadership has increased concentration risk in many market-cap weighted indices.

“To diversify this risk, investors may wish to consider equal-weight index or actively managed strategies or allocations to value-oriented and SMID (small and mid-cap companies), which currently trade at more modest valuations and could benefit if market leadership broadens.

“Dodge & Cox Worldwide Global Stock GBP Acc fund offers a differentiated exposure to global equities. The bottom-up search for undervalued companies encourages a sector and geographic allocation that is notably diverged from growth-heavy global indices.

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“We saw in 2022 how this diversified exposure protected investors when growth fell from favour, but the fund’s focus on finding businesses where fortunes and market perceptions are poised to inflect has succeeded over the long term, in spite of the stylistic headwinds for value investors at times.

“A fund designed for a smoother ride through market cycles is the Fidelity Global Dividend W Acc fund led by Dan Roberts, which aims to increase the value of your investment with low volatility versus the MSCI ACWI index. It also seeks to pay an income that is at least 25% more than the index.

“Being value oriented, globally diversified and without positions in the ‘Mag 7’ it represents a differentiated exposure from many global equity peers. The yield on offer from this fund is modest, however the focus on dividends and dividend growth can enhance stability and play a key role in providing diversification in an uncertain environment.”

The undervalued opportunities in the UK market

Alex Watts from interactive investor’s fund research team, explains: “UK equities remain relatively undervalued compared with global peers and continue to offer attractive dividend yields. According to the Q425 Dividend Monitor report from Computershare, Q4 dividend payouts rose 1.3% on a headline basis to £14.3 billion and 2025 saw underlying regular dividend growth of 3.6%. Buybacks are also playing an increasingly prominent role in UK PLC also.

“For income-focused ISA investors, the UK market provides exposure to established companies with strong cash flows across sectors such as energy, financials and consumer staples. An allocation to UK dividend strategies can help diversify portfolios away from the heavy US technology weighting that dominates many global indices.”

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“The Man Income Professional Acc C fund, managed by Henry Dixon and Jack Barrat, seeks superior capital returns to the FTSE All-Share alongside a higher yield, currently just above 4% versus just under 3% for its benchmark. Dixon has managed the fund since 2013 and the team employ a stock-picking approach, with a broad focus on buying undervalued companies.

“While yield is a key focus, the managers are diligent that it does not come at the expense of capital growth, seeking for both components to drive total returns over the long term, having a good record of outperformance over most time periods.

“A low-cost option in this space is the Vanguard FTSE UK Eq Income Index £ Acc fund, which tracks the FTSE UK Equity Income index comprising circa 100 UK Stocks with higher-than-average dividend yields. The ongoing charge of 0.14% offer cheap exposure to UK dividend payers."

The reemergence of global bonds

Alex Watts, interactive investor, says: “Global bonds have re-emerged as a more compelling asset class following the sharp rise in interest rates over the past two years. Government and high-quality corporate bonds now offer yields that were largely unavailable during the previous decade. For example, 10-year UK gilt yields stand at around 4.7% and equivalent US treasury yields at 4.2%.

“While yields remain at such attractive levels, investors may still have an opportunity to lock in attractive income levels, particularly in medium-duration bonds, which can also provide diversification during periods of equity market volatility. Bonds traditionally used as portfolio diversifier and volatility dampener from equities may (depending on the bonds) offer potential for capital appreciation if borrowing costs fall.

“Depending on risk tolerance, investors may consider an active bond allocation. Bond markets are not as efficient as equity markets and actively managed bond funds can have the advantage of taking top-down macro decisions, adjusting credit quality, duration, geography, and sector allocation, and/or undertaking issuer-level analysis and active trading tactics - though active managers also have scope to underperform.

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“The PIMCO GIS Global Investment Grade Credit Instl GBPH Acc fund, led by Mohit Mittal, aims to maximise total returns and outperform the Bloomberg Global Aggregate Credit Index via top-down duration and sector positioning as well as in-depth issuer analysis. The fund comprises over 1,400 issuances, diversified across geographies, credit ratings and duration (allowing up to 15% in below-IG issuances). The current yield of 4.6% is attractive and the charge of 0.49% is compelling given the resource and experience behind the management team.”

Structural investment themes

AI

Dzmitry Lipski from interactive investor’s fund research team, explains: “Artificial intelligence remains a powerful driver of innovation and capital spending across the global technology sector. The Landseer Global Artificial Intelligence I GBP Bs Acc fund (formerly Sanlam) is an actively managed global growth fund investing in companies developing or applying AI technologies. The ongoing charge is 0.45%.

“Alternatively, exchange-traded funds (ETFs) can provide diversified exposure across multiple AI-related companies and sub-sectors, typically at lower cost. For example, the L&G Artificial Intelligence ETF GBP (LSE:AIAG) tracks an index of companies deriving revenue directly from AI and AI-enabling technologies.”

Defence

Dzmitry Lipski, interactive investor, says:“While the more uncertain geopolitical environment is unwelcome, the reality is that for stock markets such a backdrop creates both winners and losers. While the humanitarian element of this is most important, investors might note that a sector to benefit is defence.

“Defence spending is increasing across many developed economies amid a more uncertain geopolitical environment, supporting the long-term outlook for defence companies. The VanEck Defense ETF A USD Acc GBP (LSE:DFNG) offers global exposure across aerospace, defence contractors and related technologies, with an ongoing charge of 0.55%. For investors seeking a more regional focus, the iShares Europe Defence ETF EUR Acc GBP (LSE:DFEU) provides exposure to European defence companies, with a lower ongoing charge of 0.35%.”

Precious metals

Dzmitry Lipski, interactive investor, adds: “Precious metals, particularly gold, also continue to play an important role in portfolios as a potential hedge against geopolitical risk, currency volatility and persistent inflation. The Jupiter Gold & Silver I GBP Acc fund offers diversified access across physical gold and silver bullion as well as mining companies, with flexibility for managers to adjust positioning as market conditions evolve. However, it is most suitable for investors with a higher-risk tolerance who are comfortable with volatility and potential downside.

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“A balanced approach that combines diversified equity exposure, by geography, style and market cap with selective thematic allocations and all complemented by high-quality bonds may help ISA investors navigate an increasingly complex investment landscape.”