UK fund and trust tips for 2020: Bright ideas for bargain Britain

by Fiona Hamilton from Money Observer |

The unloved UK will once again have its day. Our 11-strong panel of experts share their growth, income and wildcard tips.


L&G UK Mid Cap Index Fund

TR 1 year 15.8%, 3 years n/a*, yield n/a

Our fund panellists opted to shy away from recommending UK growth funds with either a strong focus to large companies or a bias to the more internationally geared UK-listed companies. Instead they contend that investors will be more likely to find that value lies outside the FTSE 100 index, in businesses that exhibit a greater domestic bias.

Mick Gilligan, head of fund research at investment management firm Killik, prefers a passive route to profits from this market area. He notes:

“This part of the market remains under a ‘Brexit cloud’ and any clarity on the issue in 2020 is likely to see a decent relief rally for the FTSE 250 index.”

JPMorgan Smaller Companies IT

SPTR 1 year 34.5%, 3 years 84.0%, yield 1.9%

Following similar lines to 2019’s tips, none of our investment trust panellists put forward a UK-focused trust that invests across large, mid and small caps. Instead, specialist small-cap trusts are favoured, with John Newlands, founder of Newlands Fund Research, describing JPMorgan Smaller Companies (LSE:JMI), also tipped by our panellists last year, as “a top-drawer investment trust, which holds a broad range of overlooked companies.” The double-digit discount also catches the eye. It has among the best three- year returns of UK investment trusts.


Franklin Templeton UK Equity Income

TR 1 year 14.3%, 3 years 24.8%, yield 4.7%

Colin Morton has been at the helm of Franklin Templeton UK Equity Income for 25 years, yet it does tend to slip under the radar despite strong performance over various time frames. Ben Yearsley of Shore Financial Planning describes it as “a core equity income fund that invests pre-dominately in larger companies”.

The 10 largest holdings contain most of the big dividend payers that generate the bulk of the income generated by the UK market as a whole, with BP (LSE:BP.) and Royal Dutch Shell (LSE:RDSB) the top two positions. The fund is cheaper than most rivals, with an ongoing charges figure of 0.52%.

Invesco Perpetual UK Smaller Companies IT

SPTR 1 year 31.7%, 3 years 63.2%, yield 3.3%

An unusual choice for income at first glance, given the area of the UK market the trust invests in. But Invesco Perpetual UK Smaller Companies IT (LSE:IPU) 3.3% yield, which is financed partly from capital, provides a nice cushion for investors. Under manager Jonathan Brown it has achieved among the best five-year net asset value total returns of UK investment trusts.

Philippa Maffioli, senior adviser at investment manager Blyth-Richmond, is a long-standing fan. She says:

“The managers look for financially strong companies with a competitive advantage and use diversification to moderate risk.”

A Money Observer Rated Fund 2020


Schroder Income

TR 1 year 0.4%, 3 years 18.5%, yield 4.4%

If you’re looking to gain exposure to large, higher-yielding UK companies, Schroder Income (LSE:SCF) could be right up your street, but don’t expect a smooth ride.

Managers Kevin Murphy and Nick Kirrage are value investors, and unlike many of their large companies peers are willing to invest in companies that have cut their dividend payments. Liontrust’s John Husselbee notes:

“We maintain a value tilt on our port- folios. This fund is one of the few genuinely contrarian value offerings in UK space, with the benefit of an attractive yield.”

A Money Observer Rated Fund 2020

Artemis Alpha Trust

SPTR 1 year 15.2%, 3 years 44.1%, yield 1.3%

Artemis Alpha Trust (LSE:ATS) is a poor performer on a 10-year view, with net asset value total returns over that time frame drastically behind the FTSE All-Share index.

Over the past three years, though, performance has improved, and with a new co-manager added into the mix (Kartik Kumar in May 2018) and a large discount, the trust has become a more interesting prospect, argues Charles Macdonald of Rossie House Investment Management. The portfolio has become more compact since Kumar came on board, with much more exposure to large and mid-caps, while the exposure to unquoted shares has been greatly reduced. “It is a good UK specialist opportunity,” says Macdonald.

Notes: (SP)TR = (share price) total return. All performance data Morningstar, as at 1 December 2019. *Insufficient track record.

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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