By Ryan Hughes, head of fund selection at AJ Bell YouInvest.

Troy Trojan (GB00B01BP952)

With equity markets around all-time highs and fixed interest markets looking challenged now that interest rates have started to increase around the world, a multi-asset solution that takes an absolute return mind set could prove sensible for a cautious or first time investor.

While Troy Trojan, managed by Sebastian Lyon, looks to deliver growth over the long term, importantly it has a very clear eye on protecting capital. The manager takes a top down view, trying to anticipate what is happening in the global economy and looks at monetary and fiscal policy as well as valuation metrics on different asset classes.

Typically, the equity exposure will have a quality bias with the manager taking a long term approach, often holding stocks for many years.

The portfolio has exposure to equities, bonds, cash and gold, making it well diversified and giving investors an instant portfolio.

Investors should recognise that if equity markets keep on rallying hard, this fund will lag, however, it should come into its own if markets become more volatile.

If this does happen, this fund is well placed to protect investors, particularly as the manager is currently defensively positioned with around 30% of the portfolio in cash and 8% in gold related investments.

Crux European Special Situations (GB00BTJRQ064)

The European economy has been recovering strongly during 2017 with every sign this is likely to continue into 2018 as corporate earnings continue their good momentum.

However, with many years of political troubles blighting the region, it is an area that has remained unloved by many investors despite having a huge array of interesting companies.

With this supportive backdrop, the Crux European Special Situations fund could be well placed to benefit. This business was formed by veteran European manager Richard Pease who has been successfully investing in the region for over 30 years.

Pease focuses on companies that have exceptional management and a market leading position combined with a strong financial position.

These companies should then be in a position to generate excess cash which can be reinvested to accelerate growth or returned to shareholders through dividends.

Pease uses his many years’ experience to identify good management teams and is happy to invest in a high conviction manner away from the benchmark, taking a long term view.

This approach typically finds more opportunities in medium and smaller companies and while it can be more volatile than its competitors, it is proof that talented bottom-up stock pickers can add significant value.

When combined with the fact that Crux is an owner managed asset manager that is driven to succeed and the highly supportive economic backdrop in Europe, 2018 could be a very interesting year for the fund.

Baillie Gifford Japanese (GB0006011133)

Japan had a strong year in 2017 as the economic reforms that have been taking place over the past few years continue to bear fruit.

The tailwinds remain in place for 2018 and coupled with a rapidly improving shareholder focus from company management should help the Japanese market move higher next year.

The well-resourced team at Baillie Gifford are one of the strongest around and are well placed to cope with the forthcoming retirement of the head of the team Sarah Whitley.

The team believe companies that can offer above-average growth in earnings will be rewarded over time and they focus on companies that can deliver sustainable growth.

In addition, they are not scared of investing in younger companies as well as turnaround opportunities which results in a portfolio of between 45 and 65 names with a wide range of different growth opportunities but often bearing little resemblance to the benchmark.

Importantly with Japan, the managers are prepared to be patient, having very low turnover and holding their companies for a long period of time, allowing the superior earnings growth to be reflected in the share price.

For higher risk investors, who are comfortable with some degree of volatility, this fund could be an interesting choice for the forthcoming year.

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