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Choose from 11 top funds for exposure to important investment themes
Thursday 14 Jun 2018 Author: Steven Frazer

Many people get stuck in their quest to invest because they don’t know where to deploy their money. This article aims to give individuals in this situation a head start with five funds that provide diverse exposure to important geographic territories
and sectors.

We also highlight a few more funds that are popular with investment experts and retail investors, and/or are rated highly by financial data providers, just to give you a broader selection to research should you not find our core five picks to your taste.


The beauty of investing in funds is that you get broad exposure to lots of different companies or other asset classes like bonds and property.

Certain types of funds – namely unit trusts and Oeics – are relatively cheap to buy with dealing fees rarely more than £1.50, although you are likely to incur a small annual custody charge which can vary depending on the value of your portfolio.

Investment trusts and ETFs (exchange-traded funds) will cost you the same as buying individual company shares, typically £9.95, but some platform providers won’t charge you a custody fee for this type of investment.


There are two main types of funds; active and passive. Active funds are run by a professional fund manager who selects what goes in the portfolio. The aim is to beat a benchmark index and outperform the market, meaning investors in the fund should hopefully get better returns, although ongoing charges will be higher.

Alternatively, you can invest in passive funds, often called tracker or index funds. These aim to mirror the performance of a key benchmark or index, such as the FTSE 100 or FTSE All-Share.

They do this by investing their cash to match the make-up of the benchmark they are tracking. These types of funds are relatively low-cost, although potential returns are highly unlikely to exceed the index they are tracking by a large margin.

There are literally hundreds of funds available to UK retail investors. Some have a wide-ranging investment remit, such as targeting returns that roughly match global growth.

Others are far more specific. They may target a particular geographic market, such as the UK, US, Europe or emerging markets. Or they might focus on particular industries such as technology, infrastructure or renewable energy.

Alternatively, there are funds that focus on certain investment styles such as value shares or companies which pay healthy dividends so they in turn can generate a good income for investors.


In this feature we have largely left multi-asset funds to one side and concentrated mainly on equity funds because history shows this is where the best returns come from in the long-run. Our article is aimed at someone who has at least 10 years to invest before they need to access the money and someone who can take risks. The selections may not entirely suit someone with a low risk appetite.

If you’re looking to build a lower-risk portfolio in a flash, we suggest you look at multi-asset funds or consider some of the ready-made portfolios offered by investment platform providers.


For example, AJ Bell Youinvest has a series of low-cost passive funds split into five different risk appetites including a ‘cautious’ one. The latter fund – VT AJ Bell Passive Cautious (GB00BYW8RV97) – invests mainly in assets like cash and bonds, and sparingly in shares which are deemed higher risk.


We’re taking a more hands-on approach and have broken the investment universe into five key themes – global growth, income, UK equities, emerging markets and high growth technology.

We’ve then selected a fund for each theme based on our knowledge of the investment space, the experience of individual fund managers and performance track records.

We would suggest putting a bit more cash in global growth and income and a little less in emerging markets and technology as the former are dominant themes in investing and the latter are higher risk areas.

For example, a £10,000 investment could be split into £3,500 in a global growth fund; £3,000 in an income fund (buying the ‘acc’ accumulation version so dividends are essentially reinvested); £1,500 in UK equity; and £1,000 each in an emerging markets fund and a technology fund.

Hopefully, this article provides a useful guide that helps you create an instant portfolio capable of striking the right balance to cover you come rain or shine over the long-run.

This is not a definitive list as there are other good funds on the market. Yet it does provide a good starting point, one to which you can add your own selections as time goes by and you become more savvy and experienced.



Lindsell Train Global Equity (IE00B3NS4D25)

5 years annualised return: Fund: 20.4% / Benchmark: 13.2%


This fund holds a concentrated portfolio of typically between 25 to 35 high quality companies with strong, repeatable cash flow generation. It typically avoids more cyclical businesses whose earnings are highly sensitive to economic swings and roundabouts.

The portfolio includes global brands such as PG Tips-to-Persil owner Unilever (ULVR) and drinks giant Diageo (DGE), which owns Guinness, Johnny Walker and Gordon’s Gin.

Importantly, the fund’s wide investment remit means it can concentrate on finding the best businesses regardless of where they are listed, hence stakes in an eclectic mix of overseas companies, including Heineken, gaming giant Nintendo and Japanese cosmetics firm Shiseido.

The fund management team including Nick Train focus on the longer-term, ignoring short term market noise to get under the skin of their investments’ potential for delivering attractive returns.


Scottish Mortgage Trust (SMT)

5 years annualised return: Fund: 27.4%

This investment trust is very popular with retail investors and is one of Winterflood Securities’ top picks for 2018. Fund manager James Anderson looks for companies that he expects to grow rapidly and sustainably in the future.

Global internet businesses like Amazon, Alibaba and Netflix are big names in the portfolio, as well as sports cars brand Ferrari.

Newton Global Income Fund (GB00B7S9KM94)

5 years annualised return: Fund: 11.7% / Benchmark: 10.1%

Fund manager Nick Clay scans the globe for good companies paying attractive and sustainable dividends on top of an ability to create capital growth.

The fund has a 2.9% historic yield and nearly half of its investments are in the US, with UK and select European companies also popular. It is rated as a five-star fund by data specialist Morningstar.



TB Evenlode Income Acc (GB00BD0B7C49)

5 years annualised return: Fund: 12.8% / Benchmark: 8.4%


Academic studies show time and again that compounding dividends generate most long-term investment returns, a point not lost on managers Hugh Yarrow and Ben Peters.

Don’t be put off by a historic yield only being 2.4%. Evenlode likes to buy asset-light businesses and companies capable of growing dividends year after year. Therefore you should expect decent dividend growth from the fund.

We’ve selected the Acc version of the fund so your dividend is rolled up to increase your ownership of the fund rather than collect income as cash.

The portfolio is heavily concentrated on UK-listed companies, where Unilever, Diageo and education publisher RELX (REL) are currently its top three holdings. Nearly 9% of the fund is invested in US-listed stocks.


Ardevora UK Income (IE00B4MKXW82)

5 years annualised return: Fund: 8.6% / Benchmark: 8.4%

Another fund that invests in companies that pay big dividends, Ardevora UK Income is run by Jeremy Lang and William Pattisson who are experienced managers and founders of the asset management group. They both own hefty personal stakes.

The fund can invest in a mixture of small and large companies and it yields around 3.5%.



Liontrust Special Situations (GB00B57H4F11)

5 years annualised return: Fund: 13.0% / Benchmark: 8.4%


This fund invests in British companies of all sizes and looks in particular for those unloved by the wider market. That might be because they are operating in a particularly tough industry at the moment or are perhaps dealing with short-term operating challenges.

The key point is that managers Anthony Cross and Julian Fosh are confident these blips can be put behind their investee companies in time and spark substantial share price returns.

Current political uncertainties and fairly gloomy economic forecasts for Britain mean the fund managers are not short of investment options at present.

The portfolio includes positions in oil giant BP (BP.), pharma firm GlaxoSmithKline (GSK) and consumer products giant Reckitt Benckiser (RB.).


iShares UK Equity Index (GB00B7C44X99)

5 years annualised return: Fund: 8.5% / Benchmark: 8.4%

This is a low-cost tracker fund designed to largely match UK-wide stock market returns. It tracks the FTSE All-Share index of about 700 businesses, giving investors a no-fuss way to get a slice of a diverse selection of London-listed companies.

Morningstar says it is a worthwhile investment proposition for anyone seeking broad exposure to the UK equity market.



Fidelity Emerging Markets (GB00B9SMK778)

5 years annualised return: Fund: 10.7% / Benchmark: 8.6%


Investing in emerging markets like China, India and others come in and out of investing fashion, and they’re currently being shunned by many people.

Yet the long-term story is compelling, representing a large part of the world’s 7bn-odd people and many of them with more disposable cash to spend on luxuries and other life improvements.

The Fidelity Emerging Markets fund, run by Nick Price, is a very good option to gain relevant exposure.

Around 20% of the fund is invested in Chinese companies; another 10% each in South Africa and Hong Kong; and 8% or 9% in India, Russia and South Korea.

Price’s biggest sector bets are on financials, consumer products and technology, with internet firms Naspers and Alibaba big bets, as are insurers and banks.

That spread is encouraging because emerging markets can be fairly volatile places to invest because they are particularly sensitive to international capital investment flows.


JP Morgan Emerging Markets Investment Trust (JMG)

5 years annualised return: Fund: 9.0%

Investment bank Stifel says JP Morgan fund manager Austin Forey is the ‘last of the emerging markets trust pioneers’ still at the helm and it has a ‘Positive’ rating on the trust.

‘The manager has stayed true to his investment philosophy of creating a high conviction portfolio of companies with durable competitive advantages allowing them to compound capital over the long term,’ comments Stifel.

The investment trust is particularly bullish on India and has notable exposure to banks and tech consultants in the country.



Polar Capital Global Technology (IE00B42W4J83)

5 years annualised return: Fund: 25.9% / Benchmark: 23.6%


Managers Ben Rogoff and Nick Evans have experience and expertise in abundance, and it shows in the performance. The pair’s real gift is an ability to spot long-run technology themes that are really changing the way the world works with astute company analysis.

This saw the fund buy Apple before the iPhone boom really took off. It was also early to spot the online advertising land grab of Facebook, and explains why Amazon has been among its largest holdings for years.

Rogoff and Evans also took early positions in Chinese internet winners Alibaba and Tencent, both of which remain high up in the fund’s top 10 stakes.

Cloud computing, automation/robotics and artificial intelligence are just some of the big emerging disruptor technologies that Polar Capital Global Technology is betting on big, and investors should rightly feel confident in the fund’s direction.


Neptune Global Technology (GB00BYXZ5N79)

5 years annualised return: Fund: n/a

This fund launched in December 2015 with a simple premise to give retail investors access to a focused portfolio of technology stocks driving the digital future of global economics.

Led by manager Alastair Unwin, the fund invests in the biggest, best and most disruptive innovative companies. Returns have been impressive in its short run. (SF)

DISCLAIMER: Editor Daniel Coatsworth has a personal investment in Evenlode Income referenced in this article

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