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BLOG: Six funds for the more cautious investor this ISA season

Paloma Kubiak
Written By:
Paloma Kubiak

Being cautious is a bit like wearing a helmet when you ride a bike – it might not look cool, but it sure beats a trip to A&E. And just as a helmet can protect your head, being cautious can help protect your finances – especially at times when stock markets are volatile and finding extra hard-earned cash to invest is a challenge in the first place!

So, as the end of the tax year fast approaches, I thought I’d put on my metaphorical helmet and look at some different fund ideas for those looking to invest with a healthy dose of caution. That doesn’t mean you can’t take risk with your investments – it just means those risks are well-considered.

Here are six funds for the cautious investor…

1) CT Global Extended Alpha

If you want to invest in equities but are worried about stock markets falling, this fund may be one to consider. Not only does it offer geographical diversification, but its structure also allows the manager to extend investors’ potential returns by buying stocks he expects to do well and also looking to make money on stocks he expects to do badly (shorting). He describes this as “lining up on the starting grid for a motor race with an engine 50% bigger than everyone else’s”.

2) Trojan Global Income

Dividends can be very useful in low growth, volatile environments, and the income from them can either be used or reinvested to boost your total returns. This global equity income fund has an exceptionally experienced manager at the helm who has historically done an excellent job of preserving capital in difficult markets, while the portfolio has also been much less volatile than its peers. This fund must be at, or close to, the top of the list for anyone looking for a global income fund.

3) Ninety One Global Gold

 They say investing in gold is a good hedge against central bank mistakes. And with plenty of difficult decisions to be made by the US Federal Reserve, the European Central Bank, and the Bank of England in the coming months, now may be as good a time as any to invest in the yellow metal. Ninety One Global Gold fund’s philosophy is that investing in gold equities is better than investing in gold itself because they offer leverage to the gold price. In addition, unlike physical gold, many gold miners pay a dividend and these pay-outs have been rising in recent years.

4) M&G Optimal Income

Investors preferring to invest in bonds this ISA season could look no further than the M&G Optimal Income fund. M&G is perhaps the biggest name in the UK bond space, and this is its flagship offering, with an extremely experienced manager, Richard Woolnough. This ‘go-anywhere’ fund has a flexible mandate, which enables Woolnough to shift the interest rate exposure and to invest across the fixed income spectrum. The fund can, and often does, invest in some equities, and also derivatives.

5) Brooks Macdonald Defensive Capital

If you prefer to spread your bets and invest in a multi-asset fund, this portfolio is an option. Long-term capital growth and protection is the name of the game, and it aims to deliver positive absolute returns over rolling three-year periods, in a range of market conditions, with less volatility than equity funds. Beginning life as a fund used solely by Brooks Macdonald for its clients’ own money, it was subsequently opened to the public due to increased investor demand.

6) Jupiter Merlin Income

My last suggestion is the Jupiter Merlin Income fund, which is managed by one of the most respected multi-manager teams in the industry. It has been designed to provide an immediate and growing income, with the potential for capital growth too. Firstly, the team analyses the macroeconomic environment. Secondly, it identifies fund managers most likely to perform well in that environment. The portfolio is then monitored and modified to ensure ongoing enhanced returns.

Juliet Schooling Latter is research director at FundCalibre