From funds that seek to deliver throughout the investment cycle to those that may chart a rockier course but aim to shoot the lights out over the longer term, these funds are worthy contenders for every portfolio, reports Jennifer Hill.
Investment performance is no dead cert but careful fund selection and balance between core and satellite holdings can put your portfolio on track for long-term success.
We asked six experts – financial advisers, wealth managers and our own head of funds – to each name five funds that deserve a place in every portfolio.
The sheer range of choice means we had only two duplicates in the shape of Vanguard S&P 500 UCITS ETF (LSE:VUSD) for core US equity exposure and Ninety One Global Environment, which reflects the huge trend for environmental impact investing.
Dzmitry Lipski, interactive investor
Artemis SmartGARP Global Equity
Jupiter Strategic Bond
Fidelity China Special Situations
Dzmitry Lipski, head of funds at interactive investor, regards his core picks as good options for risk-conscious investors. Artemis SmartGARP Global Equity, for example, is well diversified with a bias to value stocks, so exposes investors to less downside risk than a pure growth strategy.
“GARP [growth at a reasonable price] strategies invest in stocks that not only show higher growth characteristics than the market but are also trading at a lower valuation than they’re intrinsically worth,” says Lipski.
Jupiter Strategic Bond can ‘go anywhere’ in search of alpha but retains a careful eye on downside protection.
Lipski’s satellite picks are higher-risk propositions. Scottish Mortgage (LSE:SMT) invests in disruptive growth companies, public and private. Its discount has widened considerably as investors question whether valuations for unlisted companies have fallen far enough in response to higher interest rates.
“Scottish Mortgage is an excellent adventurous holding but recent underperformance reminds us why it needs to be tempered with some lower-risk options,” he says.
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Fidelity China Special Situations (LSE:FCSS) completes his line-up. It focuses on faster-growing, consumer-orientated companies but its return profile can be more volatile owing to the single country exposure, bias to smaller companies and ability to use gearing.
All five funds are on the Super 60 list of investment ideas.
Ben Yearsley, Shore Financial Planning
First Sentier Global Listed Infrastructure
FSSA Asia Focus
LF Montanaro Global Select
Polar Capital Global Insurance
These five funds are all personally owned by Ben Yearsley, investment director at Plymouth-based Shore Financial Planning. Many are long-standing constituents of client portfolios.
That makes picking his outright favourite difficult but he plumps for First Sentier Global Listed Infrastructure, which he’s invested in since 2007. Although some may consider infrastructure niche, he deems it a core holding.
“This fund forms part of virtually all client portfolios regardless of risk and has been a key part of my SIPP for more than 15 years,” says Yearsley. “It provides defensive growth, a decent income and the killer part for me is the inflation linkage to many of the underlying companies.”
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He reckons Asia is the place to invest for the next few decades. FSSA Asia Focus backs quality growth companies that benefit from the rise of the Asian middle class.
His satellite holdings are Polar Capital Global Insurance, which invests almost exclusively in ‘very boring but very predictable’ US-listed re-insurance companies, and LF Montanaro Global Select, a best ideas smaller companies fund.
Finally, for investors looking for a single investment Personal Assets (LSE:PNL) holds a mix of shares, government bonds and gold, and aims to at least match inflation over the medium term.
Lucy Coutts, JM Finn
Vanguard S&P 500 Ucits ETF
TM Tellworth UK Select
LF Ruffer Total Return
Polar Capital Technology
JM Finn investment director Lucy Coutts allocates 30% to one core fund in the form of ‘pure US economy play’ Vanguard S&P 500 UCITS ETF (LSE:VUSD). “It’s said that you should never bet against the US economy,” she says.
She assigns the remainder to four active satellite funds in equal measure. These offer a counterbalance to the Vanguard fund in terms of different asset allocation, sector and geographic exposure.
“To counter the passive view, it’s important to build in some defences allocating assets to the UK and continental Europe, as well as bonds and gold.”
The Tellworth fund aims to achieve positive returns from UK equities in all market conditions by holding 35 long and 35 short positions, constructed as pairs. The Fidelity fund backs European companies with strong balance sheets and cash generation, while the Ruffer fund holds equities, bonds and commodities such as gold.
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Despite last year’s growth stock selloff, Coutts retains conviction in technology as a long-term investment, making Polar Capital Technology (LSE:PCT) managed by the ‘impressive’ Ben Rogoff her top pick. “While the sector had a tumultuous 2022, investors shouldn’t ignore technological advances,” she says.
Lydia Brook, Arbuthnot Latham
Vanguard S&P 500 Ucits ETF
Comgest Growth Europe ex UK
Liontrust Sustainable Future Corporate Bond
Artemis US Smaller Companies
Ninety One Global Environment
For private bank Arbuthnot Latham, the Vanguard S&P 500 UCITS ETF (LSE:VUSD) is an ‘essential’ core position and senior investment manager Lydia Brook’s top choice for inclusion in any long-term multi-asset portfolio.
“The large-cap end of the US stock market is notoriously difficult to outperform and this physically replicated ETF offers a cheap and easy way for investors to access a slice of the world’s largest economy,” she says.
Another core pick, Comgest Growth Europe ex UK, invests in continental European companies exhibiting quality and growth attributes. As a core corporate bond allocation with the ‘added bonus’ of a sustainable approach she suggests Liontrust Sustainable Future Corporate Bond.
For investors looking to outperform the US market, Super 60 fund Artemis US Smaller Companies seeks outsized gains by investing in innovative and fast-growing businesses. It acts as a ‘great’ satellite position, to which investors can dial up exposure when feeling bullish on the US economy, says Brook.
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Another ‘attractive’ satellite is Ninety One Global Environment, which invests in companies aiding the transition to net zero. “In a world with continued regulation and global targets to reduce carbon emissions this fund can be used alongside core global equity exposure to seek alpha,” she adds.
Mohsin Bukhari, Carrington Wealth Management
Royal London Global Equity Select
HSBC FTSE All Share Index
Fidelity Asia Pacific Opportunities
VT Teviot UK Smaller Companies
Baillie Gifford Positive Change
Mohsin Bukhari, head of investments at London-based Carrington Wealth Management, picks two “all-weather” active funds that have broad appeal because they do not take excessive levels of risk or style bets.
Although both portfolios are relatively concentrated in 25 to 35 securities, their managers are not restricted in terms of company size, industry or geographical split.
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Completing his core funds line-up is HSBC FTSE All Share Index. It captures the UK market’s bias towards energy, financial and defence companies, as well as its attractive yield, thereby offers a natural hedge against inflation.
Among his satellite selections is another fund that focuses on the UK market where valuations remain “compelling”. The advisory firm plans to initiate a position in the VT Teviot UK Smaller Companies later this year having recently completed its due diligence. “Few people know about the fund, which makes it appealing to us,” says Bukhari.
Finally, Baillie Gifford Positive Change’s higher allocation to emerging markets than other global funds and its exposure to riskier, potentially higher growth companies merits it a satellite position in portfolios.
Shannon Lancaster, Ravenscroft
Ninety One Global Environment
Candriam Equities Oncology Impact
Ravenscroft believes that investing thematically allows investors to access trends that are shaping the world, such as accelerating innovation, the ageing population, and rise of the emerging market consumer.
One trend it monitors is the impact of a growing population on an already resource-strained planet. “As the world’s population increases, we will have to find solutions to challenges in areas such as energy transition, nutrition and decarbonisation,” says analyst Shannon Lancaster.
Its five picks aim to address some of these challenges. Many tackle the ‘E’ of ESG investing by investing in decarbonisation solutions and resource efficiency.
Lancaster’s number one choice is a little bit different. Candriam Equities Oncology Impact invests in a diversified portfolio of healthcare businesses with the objective of achieving broad advance in diagnosis and treatment of all cancer types. The manager also donates part of the management fee to cancer research charities.
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“The world is getting older and with age, unfortunately, comes the increased risk of ill-health,” says Lancaster.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. 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.
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