The little-known ‘specialist’ funds that can boost your portfolio

Of the more than 5,000 funds available to investors in the UK, most of the money flows into mainstream strategies, such as corporate bonds, global equities or UK equities.  

But the investment industry in the UK provides a dazzling array of options for investors seeking access to under-the-radar markets and quirky investment styles. 

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Many of these funds are grouped in the “specialist” sector, as categorised by trade body The Investment Association (IA). 

As they often invest in very narrow areas, such as single countries or a stock market theme, returns can be volatile. However, some specialist funds may make an interesting accompaniment to a portfolio packed with more mainstream stock and bond market funds.  

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For example, this year (to 12 August) some of the top funds available are in the “specialist” IA sector, including a 72% return for the Amundi STOXX Europe 600 Banks ETF (LSE:CB5) fund, 69% for SVS Baker Steel Gold & Precious Metals, 49% for iShares MSCI Poland and 34% for iShares MSCI Korea Ucits ETF.  

Here are a number of interesting investment themes and top-performing funds that may be worth considering as “satellite” portfolio positions.  

Gold & silver funds 

Rather than using a gold or silver exchange-traded fund (ETF), which is often backed by the physical metal itself, these funds are actively managed and own a mix of mining companies but also physical metals. 

This generally means more volatility, but better returns when gold and silver prices are rising, and company profits can rise quicker than underlying commodity prices. The risks are greater though, as mining companies can operate in risky jurisdictions, and may see disappointing gold discoveries or even see assets seized by hostile governments.  

Some of the top gold and silver funds this year have more than tripled the returns from a simple gold ETF, such as the Super 60-rated iShares Physical Gold ETC, which has risen 19% this year.  

The top funds include BlackRock Gold & General, Jupiter Gold & Silver, SVS Baker Steel Gold & Precious Metals. They have risen, respectively, 56%, 62.5% and 69% so far this year. 

Single-country funds 

With most equity money flowing into US shares, which make up around 70% of a typical global index, there are plenty of opportunities in under-represented markets.  

In fact, it is often single country bets that top the winners and losers’ charts each year, showing that outsized rewards can also come with plenty of risk.  

The two standout markets this year are Poland and South Korea. The latter is one of the standout international markets for Temple Bar investment trust manager Ian Lance. He has said that because Korean shares today are where Japanese shares were a couple of years ago, they are offering good value that is being ignored by many investors. 

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Lance said: “Korea is a market that has done quite badly for quite a long period of time. Valuations look very low, and it’s one of these areas [where] the story is somewhat similar to Japan a couple of years ago. In other words, you have a government now that has a clear policy to try to encourage companies to create value and to remove some of the low discounts that they are trading at. So, that is a positive catalyst.”

For Temple Bar, he recently bought two Korean banks: Hana and Woori. “These are very, very high-quality banks. Actually, the Korean economy is doing very well. South Korea’s economy is doing probably a lot better than the British economy yet they are trading at very, very low valuations. They have very good policies in terms of returning money to shareholders. So, we thought that was a really interesting area outside the UK,” Lance said. 

Korea funds performing well include Barings Korea Trust (up 35%) and iShares MSCI Korea (up 34%).  

Poland is another hot area, with the iShares MSCI Poland ETF up 49% so far in 2025. The booming stock market is linked to a strong economy. The International Monetary Fund (IMF) thinks the economy will grow 3.2% this year, and the World Bank put GDP per capital at $25,000, around double what it was 10 years. 

Even after the strong rise in shares, the market is still reasonably valued, with a price-to-earnings ratio of 14.3 times, according to BlackRock. This is similar to the UK. 

The view along Sejongno-daero, from City Hall to Gyeongbokgung, in the heart of downtown Seoul, South Korea. Credit: fotoVoyager.

Thematic 

Funds that pick companies involved in a specific business theme are common in the “specialist” investment sector.  

Investors have a wide menu of “thematic” funds to choose from, such as many technology, lifestyle and healthcare sub-sectors.  

But the data is not always in favour of these types of funds. In fact, Morningstar found that over the past five years, only 20% of thematic funds beat the wider market (MSCI World for global portfolios and S&P 500 for US-focused portfolios). One criticism is that they tend to launch at the top of the market for a theme, and then underperform as the themes go out of fashion.  

However, they can still have a place in portfolios. Polar Capital Smart Energy is one of ii’s ACE 40 list of sustainable investment ideas. Smart energy refers to the use of advanced technology and systems to manage, produce, distribute and consume energy more efficiently, sustainably and reliably. This shift towards sustainable solutions offers significant long-term investment opportunities, according to our fund research team.  

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Tapping into ageing populations across the developed world could also be a profitable theme. Dzmitry Lipksi, head of funds research at ii, made iShares Ageing Population Ucits ETF one of his funds to watch for 2025. It tracks the performance of companies that provide essential products and services to the world’s ageing population, defined as individuals aged 60 and above. 

Lipski said: “People are living longer than ever, with global life expectancy projected to rise to 77 years. By 2050, the population of adults aged 60 and above could surpass two billion.”

The fund focuses on businesses in healthcare, pharmaceuticals, financial services, and other sectors that provide products and services tailored to older adults, such as medical devices, and retirement services.