The truth is that there is no right answer, as it depends on a host of factors – most notably, your tolerance for risk, investment goals, time horizon and liquidity (how likely it is you will need this money at short notice).
The past 12 months or so have given investors lots to think about. War between Russia and Ukraine, as well as in the Middle East, was destabilising the global economy, while there were also fears around the impact of monetary policy, with central banks unsure about whether to start cutting interest rates. Amid this backdrop, a lot of equity markets still appeared expensive, most notably the US, courtesy of its exposure to AI-fuelled tech stocks.
But markets shrugged off this uncertainty. In the end, global equities returned over 20% in 2024, while US equities rose by 25%. Even unloved UK equities returned almost 10%.
It is a helpful reminder that time in the market, not timing the market, is the best way to reach your long-term goals. However, simply investing your money and taking the rough with the smooth is easier said than done. With this in mind, here are a few consistent performers for investors to consider as building blocks for their ISA in 2025.
The 10/10s
Markets have been incredibly volatile in the past decade, with Covid, inflation, rising rates and geopolitical uncertainty all having a strong influence. Very few funds have an unblemished record of producing a positive return in each calendar year – indicating they are adaptable to numerous market conditions.
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A few good examples here include JOHCM Global Opportunities, which has also returned an impressive 152.2% over the past decade. Manager Ben Leyland has a strong bias towards larger and medium-sized multinational businesses in his portfolio, which typically holds 30-40 stocks. The philosophy of this fund is: “Heads we win, tails we don’t lose too much”. The fund also can, and will, hold large cash positions if valuations are unattractive.
Another is the Guinness Global Equity Income Fund, which, in addition to returning 195.6% to investors, also pays a dividend of 2.61%. The fund is different because it invests in 36 companies, and each position is equally weighted. This, together with its one-in, one-out policy, means there isn’t a long tail of smaller holdings, so each stock can make a meaningful contribution to performance.
Steady Eddies
Of course, past performance is no guide to future performance, but there are also funds that place capital preservation at the heart of their process. One we like here is BlackRock European Absolute Alpha, which is co-managed by Stefan Gries and Stephanie Bothwell. This is a long/short pan-European equity fund, which has low levels of volatility. It has produced positive returns in eight of the past 10 calendar years (it lost 2.7% and 5.2% in 2022 and 2016 respectively). It has returned 61.1% in the past decade.
Another to mention is Ninety One Diversified Income, which sits in the IA Mixed Investment 0-35% shares sector. Managed by John Stopford and Jason Borbora Sheen, the fund targets a yield of around 4% annually distributed monthly, by principally investing in fixed income securities and some equity positions. The portfolio also uses hedging for downside protection. The fund has produced positive returns in nine of the past 10 calendar years (it lost 5.47% in 2022).
Consistency of income
I’ve previously discussed the importance of reinvested dividends – so I thought I’d highlight a couple of investment trusts that have consistently raised their dividends for a number of years.
Investment trusts have a unique advantage when it comes to paying a regular income. Unlike other types of investment funds, investment trusts don’t have to pay out all the income they receive from their portfolios each year. They can save up to 15% and tuck it away in a revenue reserve. This allows them to hold back some of the income they receive in good years and use it to boost dividends when payouts might otherwise be falling.
A couple of trusts that have increased their dividends for more than 50 years include two UK offerings in the shape of City of London Investment Trust and Murray Income Trust. City of London focuses on larger companies and pays a dividend yield of 4.77%. Murray Income is all about building a portfolio of high-quality companies that deliver a resilient income, as well as offering strong capital growth prospects. It currently has a dividend yield of 4.5%.
Market meltdown ready
I’ve also chosen a few funds that are well-positioned to navigate a very challenged global economy. A good example is Polar Capital Global Insurance. This fund typically invests in 30-35 companies. Managed by Nick Martin, it has proven its ability to demonstrate alpha in all market conditions.
Insurance is a low beta sector and tends to be less volatile than the wider market. That has been reflected by the fund’s performance: it has produced a positive return in nine of the past 10 calendar years and has returned 250.5% over the past decade.
The final fund I’d mention is Rathbone Strategic Growth Portfolio. Managed by David Coombs, it targets a risk level of around two-thirds that of equities, so investors are shielded somewhat during market downturns. David uses a disciplined asset-allocation framework and a forward-looking assessment of correlation, risk and return, as the cornerstone of the investment process. Asset classes are then divided into three distinct categories: liquidity, equity risk and diversifiers. The fund has returned 79.7% in the past 10 years.
Darius McDermott is managing director of FundCalibre and Chelsea Financial Services
