How the experts are using their ISA allowance
Ben Yearsley, Wealth Club’s investment director
I put the cash in a stocks & shares ISA at the start of the tax year, as I normally try and do, but didn’t invest it all immediately. When I invested I split the money three ways in Perpetual Income & Growth Investment Trust, Lloyds Bank shares and Old Mutual UK Alpha fund.
I purchased Lloyds and the Old Mutual fund post Brexit to take advantage of depressed prices in the immediate aftermath. Financials looked especially cheap and actually still do look one of the few areas offering genuine value. The dividend prospects for Lloyds look good – the valuation is undemanding and the threat of regulation seems to have diminished. I added to the holding yesterday with some cash in the ISA.
Old Mutual UK Alpha was and is also full of value stocks. After eight years of a growth market I thought there might be a rotation into value – I’ve been very surprised at how quick that rotation has been, but am still happy holding and even adding more. Richard Buxton is an excellent long term manager who has outperformed in many different markets.
Perpetual Income & Growth was bought pre-Brexit. It has been slightly disappointing to be honest, but I’m a fan of manager Mark Barnett to deliver over the longer term. It’s a quality equity income trust with a bit of gearing thrown in for good measure! It was and still is on a discount of about 10% as well.
Maike Currie, investment director for personal investing, Fidelity International
With inflation rising sharply over the past few months and market sentiment starting to look uncertain, I’ve been topping up my holding in gold within my ISA as a hedge against both. My fund of choice is the Investec Global Gold Fund, which invests in the shares of gold mining companies.
However, as I’m ultimately investing for the long term and looking for capital growth, a significant chunk of my ISA portfolio continues to be invested in equities. I’ve continued to spread my investments across a number of different geographical regions to help protect my money from any potential volatility we might experience. As a result, I have opted for the Fidelity Global Special Situations Fund, managed by Jeremy Podger.
As for my daughter Elise’s portfolio, I have adopted a ‘lock up and go’ approach with her junior stocks and shares ISA investing. I’ve invested in the Fidelity Index World Fund as I wanted a ‘set and forget’ fund that is low-cost and low maintenance and a global tracker seems to be the ideal choice for this.
Adrian Lowcock, investment director at Architas
I am looking to keep my ISAs invested for the long term, ideally 30 years or more, but at least 10 years. As such I am comfortable taking on some risk and less concerned about the current valuations of markets.
However, I do prefer to invest in markets that look relatively cheap as the price you pay does have an impact on overall return. First off is Europe. The market has been holding back as the political situation remains unresolved, but the economy continues to improve and eventually the market will rerate this. I am therefore looking to add to my European equity exposure. Blackrock Continental European, managed by Vincent Devlin, has a value tilt and doesn’t chase short term market movements.
I am also interested In India. Narendra Modi has made some tough decisions to improve the Indian economy, while the demographics remain very attractive. I have gone for Jupiter India which offers access to mid and smaller companies in the region. Manager Avinash Vazirani looks for companies whose value is underappreciated in the market and does this by conducting detailed company research.
I have also topped up my exposure to smaller companies in the UK. The sector is often overlooked by investors even though the potential returns are good and we have some excellent managers in this space. I’ve gone for Franklin UK Smaller Companies.
Darius McDermott, managing director, Chelsea Financial Services
There are a lot of uncertainties in the world at the moment so I’m playing it fairly safe this ISA season. I’ve chosen Smith & Williamson Enterprise, an absolute return fund. It aims to deliver equity-like performance but with half the volatility of the UK equity index. With markets looking a little ‘toppy’ at the moment I think that is a useful attribute. While the main use of this fund in my portfolio is to add a little bit of protection should markets take a turn for the worse, I particularly like this fund because it has a history of performing well in rising markets too.
For my kids’ Junior ISAs, I’m happy to take a bit more risk as they have a long-term time frame. I’ve chosen Goldman Sachs India Equity Portfolio. India has been one of my favourite emerging markets for a number of years as the long-term growth opportunities are so strong. It has great demographics, an increasingly educated workforce and an entrepreneurial culture. Business has been stifled in the past by too much red-tape but prime minister Narendra Modi has proven himself to be very pro-business and has made a number of reforms which should lessen the bureaucracy.
Ron Morgan, pensions and investments analyst, Charles Stanley Direct
JO Hambro UK Equity Income is a core equity income holding I perennially add to. I like equity income as a form of investing – finding companies paying decent dividends whose pay outs are set to grow – and a collection of these make ideal permanent portfolio holdings. I particularly like this funds because the portfolio offers well-rounded exposure that includes economically-sensitive areas as well as the typical defensive areas associated with equity income investing.
Last summer there was a scare surrounding UK commercial property funds in the aftermath of Brexit. There was a considerable fall in value in investment trusts investing in the area such as Schroder Real Estate. I felt the pessimism was overdone so I bought some shares in this, one of the more highly geared trusts, with a belief that the fundamental income-generating nature of the asset class would lead to recovery in the long term. As it turned out I was lucky to buy at the price I did as share in all the trusts investing in the area rebounded much quicker than I imagined. With a 4% yield, I’m happy to keep this in my ISA longer term.
First State Greater China Growth has long been my favourite for this higher risk and specialist area, but it closed to new investment in 2012 as assets approached a size the managers considered might compromise performance. However, the fund’s growth in assets reversed amid waning investor sentiment towards the region. With the fund reopening I decided to invest. The fund is managed using First State’s long-established and successful investment process looking for high quality, well managed companies that look after the interests of minority shareholders. There is a strong emphasis on long term investment decisions and capital preservation in what is inevitably a volatile area to invest.