Save, make, understand money

Experienced Investor

Three up and coming funds to watch in 2019

Written By:

If you are looking for new investment ideas for the new year, here are three up and coming funds to watch in 2019.

Spotting a talented fund manager and buying into their fund early doors can provide your savings with a significant boost.

Smaller funds tend to be more agile and able to make the most of opportunities when they arise. But identifying a good manager early in their career, or noticing a new fund among the many available to us is easier said than done.

So all too often, investors buy into a fund only after a manager has proven themselves and the product is well-established. Sometimes this is the right thing to do. At other times it can lead to disappointment as future performance is not as good as that of the past.

There can be a number of reasons for this. For example, the manager may have compromised their investment style because they have attracted significant assets and are struggling to manage a larger portfolio, their style may have fallen out of favour, or there could even be a psychological element to it: like any sportsmen will tell you, it is tough when all eyes are on you and every decision you make is scrutinised.

Whatever the reason, it demonstrates that there is much to be said for backing an exciting and successful fund from an early stage.

Here are three exciting funds to look out for in 2019…

For investors seeking exposure to the UK market, I would highlight LF Gresham House UK Multi-Cap Income. Manager Ken Wotton has unrivalled expertise investing in smaller companies, so while this fund can invest in businesses of any size, it is likely to have a bias towards those at the smaller end of the scale. So it could be a good option for anyone looking to access the exciting growth potential that the UK’s smaller companies can offer. What’s more, with an initial target dividend yield of 4%, it could be attractive to income investors.

Ken is not afraid to ignore certain parts of the market, such as natural resources and property, preferring to focus on sectors where he feels he has an edge. He examines the quality of management teams and their alignment with investors, favouring simple businesses with a clear strategy and a large market opportunity.

LF Gresham House UK Multi-Cap Income is on FundCalibre’s Elite Radar list, which means it is on our research team’s watch list. Since the fund was launched at the end of June 2017, it has returned 10.5%, which compares to a 2.5% loss by the average fund in the Investment Association (IA) equity income sector.

Evenlode Global Income is another Elite Radar fund. Launched in November 2017, it follows the same investment philosophy as the established Evenlode Income fund – a UK-focused income strategy which has led its sector over three and five years. I believe this success can be replicated in a wider global mandate.

Managers Ben Peters and Chris Elliott take the view that the market fundamentally underestimates the value of high quality businesses because it is too short-termist. They focus on companies from around the world with asset-light business models, which can’t be disrupted easily. So far, performance has been strong with a 9.5% return since November 2017 versus 2.8% by the IA global equity income sector average.

Looking ahead to 2019, I suspect that Japan has a lot to offer investors, as the market is supported by a number of positive dynamics. These include improving corporate governance and a growing dividend culture – two trends that Baillie Gifford Japanese Income Growth taps into.

The fund is managed by Karen See and Matthew Brett (who also runs the Elite Rated Baillie Gifford Japanese fund which has an excellent track record). They also form part of Baillie Gifford’s Japanese equity team, which I believe to be one of the best in the world. The managers look for companies which enjoy a competitive advantage and have the potential to grow their dividends over time.

Since launch in July 2016 the fund has returned 39.3% which compares to 29.3% by the average fund in the IA Japan sector.

Darius McDermott is managing director of Chelsea Financial Services & FundCalibre