Investing for the year ahead - eight funds and investment trusts for 2022


The year end is a natural time for people to review their investment portfolios and ensure it is well positioned for the year ahead. Ryan Hughes, head of investment research at AJ Bell, looks at eight funds and investment trusts with different risk levels covering bonds, global equities, infrastructure, healthcare and dividends.

These articles are for information purposes only and are not a personal recommendation or advice. Past performance isn't a guide to future performance, and some investments need to be held for the long term. Remember that the value of investments can change, and you could lose money as well as make it.

Cautious investors

I’m sticking with the Personal Assets trust for the 3rd year in a row, particularly as the economic scenario that experienced manager Sebastian Lyon at Troy has been worrying about seems to be coming to fruition. With jittery equity markets and fears over inflation remaining elevated for a considerable period, the defensive positioning of this trust, and in particular its exposure to inflation protecting assets such as gold and inflation linked bonds should sit well for the year ahead. The portfolio is relatively unchanged from a year ago with 11% in gold and 31% in index linked bonds supporting the core exposure to high quality equities such as Microsoft, Visa and Nestle. As a result, the trust works well in providing investors with an instantly diversified portfolio and given the emphasis on capital protection should sit comfortably with cautious investors.

With high inflation and interest rates expected to increase, it could be a challenging time for fixed interest but many investors will still want to hold bonds as part of a diversified portfolio. Keeping duration short should help dampen volatility and protect against capital losses and therefore the Fidelity Short Dated Corporate Bond fund may work well with its focus on the higher quality part of the UK corporate bond market. The fund is managed by the highly experienced Sajiv Vaid and backed by the usual extensive resources at Fidelity. Unusually, this fund has flown a little under the radar and therefore is only £150m in size making it easier for the managers to adjust the positioning, while the fund is very diversified as it is spread across well over 100 different companies with names such as Lloyds Bank, Anglian Water and Heathrow featuring in the largest holdings.

Balanced investors

For many balanced investors, exposure to global equities is a core element of a portfolio and the Monks IT provides investors with a highly credible actively managed trust from the Baillie Gifford stable. While slightly in the shadow of its illustrious Scottish Mortgage cousin, Monks is much more diversified and less volatile and therefore works well for balanced investors wanting global exposure. Importantly, the trust still has the growth focus that Baillie Gifford is synonymous with but in a more controlled manner and still has exposure to the likes of Tesla, Alphabet and Microsoft as well as many other smaller positions too. Well managed by experienced investors, this trust brings global exposure for an OCF of 0.43% per annum.

As the world emerges from hibernation following on from the covid lockdowns and economies look to get back to full throttle, the importance of high-quality infrastructure has been clearly evidenced. Whether it is through energy needs, distribution networks or communication services, infrastructure is a key part of a fully functioning economy. The First Sentier Global Listed Infrastructure fund looks to provide exposure to all of these areas and more in a global portfolio of infrastructure companies. With over 40% invested in energy related companies, it provides exposure to many who are leading on energy transformation while also giving exposure to critical distribution infrastructure such as railroads and toll roads. The fund benefits from the experienced team at First Sentier based in Australia who have been at the forefront of infrastructure investing for many years.

Adventurous investors

While still in the midst of the pandemic, a healthcare selection might seem like an obvious choice, but Worldwide Healthcare Trust has had a tough 2020 for a number of reasons. An underweight to the big covid pharma stocks and an overweight to life sciences, biotech and China, this trust has faced some strong headwinds and underperformed its benchmark by 20%. However, the bigger picture away from the immediate covid winners’ story is how the rapid drug development of the last 18 months translates into revolutionary new treatments looking forwards. The trusts managers, healthcare specialists OrbiMed continue to find very attractive opportunities and the issues in China have created further buying opportunities. In addition, the trust has access to private markets and has been looking to invest in the unlisted space with c7% of the trust now here. With the long-term drivers behind healthcare well established and further investment set to continue making for an exciting future ahead for drug development, this broad, diversified play on healthcare looks attractive after a period of significant underperformance.

For adventurous investors, exposure to smaller companies is often a key part of a portfolio’s design. While big companies such as Tesla, Apple and Alphabet take the headlines, it’s often the smaller names that are the engine room of an economy and with global growth set to remain strong in 2022 this could create another strong environment for smaller companies. The ASI Global Smaller Companies fund led by Kirsty Desson and Harry Nimmo builds on their tried and tested investment process that successfully transitioned to the global scene over a decade ago. While the name implies exposure to smaller, risky names, smaller companies on a global scale means something very different and therefore many of the companies would qualify for the FTSE 100. Over half the fund is invested in the US with a significant focus on industrial and technology companies as the team seek out faster growing companies who have momentum.

Income seekers

Japan has continued to be a shining example of how to manage company balance sheets in recent years with many sat on huge amounts of cash without the millstone of enormous debts. This is translating into strong dividend growth for investors in the country at a time when income feels like a scarce commodity. The Coupland Cardiff Japan Income & Growth trust has the highly experienced Richard Aston who previously led the Japan team at JP Morgan before joining CC a decade ago. The trust is yielding 3% and impressively managed to grow this during the pandemic as the strength of Japanese companies came through. The trust does use long term gearing and therefore will be a little more volatile than peers but for those wanting a potentially growing income stream and diversification away from the traditional income companies, this trust looks interesting.

For many investors who want income, the UK is the obvious place given its traditionally higher yield, but away from the UK, other regions also have strong dividend cultures. In Asia, dividends have long played a key role in shareholder returns and the Jupiter Asian Income fund looks to capitalise on this this. Manager Jason Pidcock is a cautious investor, seeking out high quality companies that have strong management and governance and a clear focus on the shareholder to ensure dividends are a key part of the company strategy. The fund is significantly underweight China, preferring the more predictable governments of Australia, Taiwan and Singapore among others. Asian companies continue to be relatively well managed with low debts, helping support the dividend which currently sits at over 3% from a concentrated portfolio that includes the likes of Samsung, Taiwan Semiconductors, Macquarie and BHP Billiton.

These articles are for information purposes only and are not a personal recommendation or advice. Past performance isn't a guide to future performance, and some investments need to be held for the long term. Remember that the value of investments can change, and you could lose money as well as make it.

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Written by:
Ryan Hughes

Ryan Hughes is Head of Investment Research at AJ Bell. Ryan started his career in 1999 working for an independent financial adviser, progressing to become Head of Portfolio Management at an award-winning advisory firm. Ryan then joined a global asset management firm as a Fund Manager, where he oversaw more than £10bn of multi-asset portfolios and also sat on the investment and global asset allocation committees. After seven years, Ryan joined a small multi-asset boutique managing portfolios for clients all around the world, before joining AJ Bell three years later to help establish our investment capability. As Head of Investment Research, Ryan now oversees all actively managed investment solutions and fund research.