Specialist fund and trust tips for 2020

by Kyle Caldwell from Money Observer |

A cautious approach is centre stage in the 2020 tips line-up.

In a departure from the norm, none of our panellists were prepared to back a commodity-focused fund or investment trust. Instead, several have taken a relatively cautious approach to traditionally higher-risk sectors, from India to private equity, while others are favouring income stalwarts such as infrastructure.

Stewart Investors Indian Subcontinent Sustainability

TR 1 year 10.9%, 3 years 22.5%, yield n/a

Tipped once again, having also been recommended in 2019. Stewart Investors Indian Subcontinent Sustainability has a very stable and superior long-term performance record among 17 specialist funds that focus on India. The two managers who run the fund, Sashi Reddy and David Gait, are highly experienced. FundExpert’s Brian Dennehy adds:

“The fund taps into young demo- graphics, reform-minded governments and low debt levels that make much of the Asian region so attractive.”

Polar Capital Technology IT

SPTR 1 year 25.5%, 3 years 81.1%, yield n/a

Polar Capital Technology (LSE:PCT) is a fund for those who believe the technology bull run is here to stay and that current valuations reflect reality rather than being excessive. This trust aims for capital growth from a sectorally diversified portfolio of technology companies.

Two thirds are North American-based, with nearly a fifth in Asia including Japan. Net asset value total returns are ahead of the Dow Jones World Technology index over three, five and 10 years. Peter Hewitt likes its focus on mega caps such as Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), and Apple (NASDAQ:AAPL), many of which are on modest price/ earnings to growth (PEG) ratios.

Oakley Capital Investments IT

SPTR 1 year 32.8%, 3 years 69.9%, yield 1.4%

Oakley Capital Investments (LSE:OCI) invests for growth in private businesses, mainly in Europe. Founded in 2007 by lead manager Peter Dubens, its performance has picked up considerably over the past three years. According to John Newlands the wide discount (25% in late November) reflects investor worries about high fees and past decisions, such as a share dilution scheme. However, he is impressed by Dubens’s ability “to acquire and enhance great holdings”.

First State Global Listed Infrastructure

TR 1 year 15.7%, 3 years 32.0%, yield 3.0%

First State Global Listed Infrastructure also tipped last year, and for the same reasons our experts are favouring the fund once again. First off, the panellists like infrastructure’s monopoly-like qualities, which provide stability through an economic cycle. Moreover, the key attraction of this fund is that the investment team keeps a close eye on preserving capital. Ben Yearsley describes it as a “core long-term holding”. He adds:

“It invests in things many people have to use on a daily basis, which often have inflation-linked income streams.”

Polar Capital Global Insurance

TR 1 year 16.0%, 3 years 38.9%, yield n/a

Polar Capital Global Insurance has once again backed for 2020. Square Mile’s Victoria Hasler notes that this is a sleepy sub-sector of markets that is not widely covered, as it is perceived as too complex. A major attraction is the sector’s low cor- relation with equities. Fund manager Nick Martin is an experienced investor. Hasler adds:

“It is a sensible strategy which emphasises well-managed and proven insurance companies that have high returns on equity and good underwriting records.”

The Renewables Infrastructure IT

SPTR 1 year 22.2%, 3 years 46.1%, yield 6.0%

Another repeat recommendation, Renewables Infrastructure (LSE:TRIG) works well as a diversifier in a portfolio, particularly as an alternative to the pricey and low-yielding bond market. The trust invests in wind, solar and battery projects for a high and consistent income stream with inflation protection. Wind currently dominates its portfolio, two thirds of which is UK-based. Net asset value total returns are among the best in its sector, and its shares yield 5.2%. Tim Cockerill says:

“The majority of the return will come from income.”

Pantheon International IT

SPTR 1 year 13.4%, 3 years 37.4%, yield n/a

Pantheon International (LSE:PIN) is a US managed fund of private equity funds. The majority of its sub-funds focus on buyouts, and over half its portfolio is US-based. Investing for growth, it has achieved five and 10-year NAV returns well ahead of the MSCI World index. Its lack of yield helps explain its wide discount.

Philippa Maffioli says it provides exposure to some of the best private equity managers in the world, and recommends it for those wanting to reduce their UK exposure.

Jupiter Absolute Return

TR 1 year -3.3%, 3 years -8.4%, yield 1.2%

The targeted absolute return fund sector has a bad reputation and rightly so, as was pointed out in Money Observer’s December 2019 magazine. But James Clunie, the fund manager at the helm of Jupiter Absolute Return, is well regarded, although performance has been poor recently, Liontrust’s John Husselbee says.

“We see alternative funds as those that provide low correlation to traditional asset classes; we divide potential holdings into hedge funds (or return enhancers) and absolute return vehicles (risk reducers). Jupiter Absolute Return comes in the latter category, a genuine long/short fund that has provided protection in falling markets.”

Note: (SP)TR = (share price) total return. At time of going to press, our 2020 Rated Fund selection had not been finalised. All performance data Morningstar, as at 1 December 2019.

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.

This article was originally published in our sister magazine Money Observer. Click here to subscribe.

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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.  

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