BLOG: Eight funds to fall in love with this Valentine’s Day
As in life, when it comes to our investments, relationships can be long-term or short-lived. They can be volatile: euphoria one minute then despair another. Sometimes they can seem boring, but turn out to be the rock-solid base we need to keep everything else on track.
As we approach Valentine’s Day, I thought I’d take a look at some different investments you might consider this year. Some that everyone loves, the perennial wallflowers, those with unrequited love and the ones we might want to give a second chance.
Everyone loves… metals
While gold and silver may feature on the list of Valentine’s Day presents, investors are getting increasingly interested in other types of metals. Why? Because, as we transition to a lower carbon world and move away from fossil fuels, demand for the likes of copper and nickel, which are required for electrification, and lithium, which is needed for battery technology, should increase significantly.
1) TB Amati Strategic Metals – mining is often regarded as a ‘dirty’ business – one which has a negative impact on both the environment and local communities. However, modern mining practices are greatly improved and this fund targets investment in well-run companies with responsible practices. The strategy places great emphasis on the stage in which metals are in their cycle.
2) BlackRock World Mining Trust – this is a specialist trust offering exposure to mining and metals companies globally. In addition to investing in quoted securities, the trust may also invest in royalties derived from the production of metals and minerals, physical metals, and unquoted securities. It also offers an attractive dividend yield to investors.
The perennial wallflower… bonds
Bonds have not looked attractive for many years. Record low interest rates around the world meant that the income they produced was low and the risks often outweighed the potential reward. But after a big correction in the market last year, we are now in a scenario where yields are up, and prices are down – and that creates opportunities. For the first time in a long time, we’ve invested in corporate and Government bonds.
3) Baillie Gifford Strategic Bond – this fund has the flexibility to invest in both investment grade and high yield segments of the bond market. While trying to second guess central bankers and forecast interest rates has been the undoing of many fixed income managers, the people running this fund stick to what they do best, which is picking stocks using in-depth research. The current distribution yield on the fund is 4.3%.
4) Royal London Corporate Bond – managed by the experienced Jonathan Platt, this fund offers access to a portfolio of predominantly investment grade corporate bonds. What sets this fund apart from many of its peers is the manager’s ability to identify stocks with superior risk-adjusted returns in the less well-researched parts of the market. The result is a fund with an attractive yield (currently 4.9%), but a lower risk profile than many of its sector peers.
Unrequited love… UK equity income
The UK stock market has been unloved for many years as first Brexit, then a string of government policy mistakes, have resulted in investors shunning the asset class. With the IMF now predicting the UK’s economy will slow more than Russia’s this year, the future does not look bright! However, the FTSE 100 proved resilient in 2022 and has started 2023 positively. Coupled with the good yield you can get from UK dividend-paying companies, UK equity income funds could rise in popularity as inflation continues to bite.
5) Schroder Income Growth – launched in 1995 and run by Sue Noffke, Schroder Income Growth fund’s principal aim is to provide real growth of income in excess of the rate of inflation. It invests mainly in the shares of UK larger and medium-sized companies, although it can also invest some of the portfolio in the shares of firms listed abroad.
6) Janus Henderson UK Responsible Income – this fund has a well-defined environmental, social and governance (ESG) investment approach, combined with a tried and tested process which has strong historic credentials. Manager Andrew Jones won’t chase yield and will look for a balance of growth as well as an attractive income, which makes for a strong all-round fund.
Give them a second chance..? US and China
Having been the darling of an investor’s portfolio for the past decade, US larger companies and in particular the tech stocks had a spectacular fall from grace last year. But these companies’ shares are now cheaper and will Microsoft, Apple and other such names really stop doing well in the world’s largest economy?
Having suffered from Government intervention in the stock market and continued lockdowns for the past few years, China, the world’s engine of growth had stalled. But with cheaper valuations and the economy finally reopening, are the opportunities too good to ignore?
7) AXA Framlington American Growth – innovation, unique brands and intellectual property are the sort of features that can give companies a competitive advantage, helping them grow into market leaders. This is exactly the type of company that manager Steve Kelly and his team hope to uncover in their quest for growth stocks in the US market.
8) FSSA All China – unlike many Chinese equity funds this portfolio invests across the whole of China including the vast A-share market which can sometimes be ignored by international investors. The managers invest in long-term, sustainable growth opportunities, with a heavy emphasis on finding high quality businesses and management teams.
Juliet Schooling Latter is research director at FundCalibre