ISA suggestions for the undecided
As the clock ticks down to the end of the tax year, undecided investors could be in more of a quandry than ever. So we take look at five funds where the manager makes the big decisions for you.
Rathbone Strategic Growth Portfolio
Headed up by David Coombs, this multi-asset fund is one of the breed of funds that target a certain level of risk and then look to maximise returns. David aims to beat cash by between 3% and 5% per annum over an entire market cycle, and with two-thirds the risk of equities. Since launch, it has proven adept at shielding investors from market downturns.
He says that recent volatile market movements highlighted just how sensitive the market has become to protectionist rhetoric, certainly in the short term. His core position is that this is “just another roar from the Trump blunderbuss” and in the longer term, concessions will have to be made. As he has been positioned for slower global growth for some time, through the purchase of gold, Australian dollars, and UK gilts, he may add to these positions if the trade war situation intensifies.
This fund is essentially divided into two fixed income and equity portfolios. Its two co-managers will attend all company meetings and, not only will they decide whether they like the company or not, they will then choose whether to hold the company’s shares or its debt.
They currently favour companies which earn their profits from overseas operations (where growth prospects are better) and which are not too tied to sterling. “Due to investors’ relentless quest for income,” they say, “the returns on bonds are down and value has become harder to find. We therefore think a defensive approach that also seeks creditworthy companies with strong balance sheets operating in secure business environments has the best risk-return potential for 2018.”
M&G Episode Income
Steven Andrew’s M&G Episode Income fund differs from many of its peers in that its philosophy is based on market psychology; Steven believes markets are inefficient and skewed by irrational behaviour. As such, he looks to exploit this through holding out-of-favour assets with attractive underlying fundamentals.
He currently has 47% in global equities and around 40% in government bonds – mainly those of the US. “The recent rise in the yields on US government bonds now makes them a more worthwhile investment,” Steven said. “They should now provide good quality diversification while delivering a decent level of yield.”
Premier Multi-Asset Growth & Income
The managers of this multi-manager portfolio follow a three-stage process to selecting funds; making asset class allocation decisions – which are based on the broader economic backdrop; fund selection – which involves choosing the specific vehicles needed to provide enough diversification; and active management – which is rebalancing the portfolio when necessary.
The underlying funds they hold have a common trait: their managers secretly enjoy a good market sell-off. They enjoy the fact that a decent bout of panic causes other investors to do silly things – like selling a perfectly good company because people are fretting over Donald Trump’s last tweet. So they will have made the most of the opportunities that arose in February, when markets experienced their biggest correction for some time.
Schroder MM Diversity Tactical
This fund-of-funds usually holds about 80% in equities. The remainder will be held in either fixed income, alternatives or cash. The managers adopt a contrarian approach to investment and believe that differing economies benefit disproportionately at various stages of the market cycle.
At the moment, the fund has around 22% in alternatives and 24% in cash. This is because, according to the manager, a combination of macroeconomic factors – such as president Trump rolling out fiscal policy while unemployment is historically low, accelerating wage growth and commodity prices bouncing back from last year’s lows – mean he doesn’t believe inflation will remain low and stable this year. This could negatively impact both the equity market and bonds.
Tony Yousefian, senior research analyst, FundCalibre
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Tony’s views are his own and do not constitute financial advice.