‘Disruptive Technology’ – Allianz Technology Trust

Disruptive technology is any technological development which has the potential to change drastically (disrupt) the way we do things. These products or processes exist across a range of sectors and industries, from banking to medicine. ‘Smart technology’ is already having a huge impact on our lives. We like the Allianz Technology Trust because the investment team is based in Silicon Valley, and we feel this gives them an edge in determining the winners and losers of this rapidly evolving space.

‘Healthcare’ – Polar Healthcare Opportunities Fund

We are all getting older – fact! We like this fund because it takes advantage of the growing need for more efficient healthcare through all areas of the sector. The trust actually ties into our first theme somewhat, because it holds a significant underweight to the traditional large-cap pharmaceutical space in favour of biotechnology, and Medtech & Services, with about +70 per cent held in US companies overall. The fund lagged the benchmark slightly in the last year but performed well in the longer term; however, it can be volatile.

‘US domestic-facing companies’ – Legg Mason Royce US Small Cap Opportunity

Some investors have questioned whether the US equity market is looking expensive; however, we believe that compared to the rest of the world, the US remains the most attractive market. Global growth looks as though it will remain modest, but we think it will continue to be led by the US, where the economy and the dollar remain strong. A strong dollar typically benefits domestic companies, not least of all because US consumers get more bang for their buck (earnings from US companies with overseas revenues, will come under pressure from the higher dollar because their good become more expensive). We hold the fund for this reason and because of its bias towards quality and value, although we are aware of how rapidly smaller stocks can underperform given more defensive market conditions.

‘Corporate governance’ – JP Morgan Japanese Investment Trust

We recently added to the trust after its discount sunk to 11 per cent, but this is not just a relative value play. The trust, lead-managed by the very experienced Nicholas Weindling, gives solid exposure to the key themes we see driving returns in the long term: Ageing populations, and the ever-increasing automation and mechanisation of workplaces. We believe that Japan may also experience earnings upgrades this year through positive changes in corporate governance, an overlooked development in the country.

‘Alpha over beta!’ – Henderson UK Absolute Return Fund

By this, we mean funds which very actively look for growth. We are in a period where there is growing dispersion amongst geographies, stocks and sectors, so the ability for managers to be tactical is becoming increasingly important. This means that long/short managers are well placed to generate returns on both their long and short books (ability to buy and sell the market). Long/short strategies are interesting as they can generate returns regardless of market direction. One fund we like is Henderson UK Absolute Return because of its strict risk controls.