13 specialist funds and trusts for adventurous and cautious investors in 2019

Our expert panellists' choices are a mixed bag, ranging from punchy options for bold investors to steady income fund ideas for the more defensively minded. Kyle Caldwell and Fiona Hamilton report.

Single country tips

Janus Henderson China Opportunities

TR 1 year -10.5%, 3 years 50.6%, yield 1.2%

China's stockmarket was hit hard in 2018 due to the trade war and strong US dollar. On the one hand, some experts are wary of the region amid concerns that its overheated property market will led to a full-blown crisis. Others, including Liontrust's John Husselbee, points out that for years there has been talk of a hard landing in China, but as yet it has failed to materialise. To play the region, Janus Henderson China Opportunities is his preferred fund; it has been managed by Charlie Awdry since 2006. Husselbee adds:

"President Trump has targeted much of his trade rhetoric upon China, and this has dampened the sentiment perhaps more than the fundamentals." (2019 Money Observer Rated Fund)

Matthew China Smaller Companies

TR 1 year -4.2%, 3 years 51.9%, yield 0%

A racier way to play a China market recovery in 2019 is to back a fund that specialises in smaller companies, argues Shore Financial Planning's Ben Yearsley. The portfolio manager, Tiff any Hsiao, believes that small-cap businesses in China are at the forefront of the country's economic shift away from manufacturing to consumption. Yearsley adds:

"For brave investors this creates a long-term buying opportunity. Matthew China Smaller Companies is high-risk and it will be volatile, but in 10 years' time it should be worth a multiple of what it is now."

Stewart Investors Indian Subcontinent

TR 1 year 6.7%, 3 years 52.8%, yield 0.1%

The attractions of India are well-documented: it has a young population with an average age of 26, which means lots of potential taxpayers and spenders. In addition, it has a reformist prime minister who is business-friendly. But on the other hand, India's stockmarket is notoriously volatile. Stewart Investors Indian Subcontinent fund reduces that risk, points out Jason Broomer of Square Mile, as it focuses on high-quality companies.

He adds:

"This is a strategy that tries to address some of the varied risks that investors face in this part of the world, through a process that is disciplined, thoughtful and focused on the long term." (2019 Money Observer Rated Fund)

JPMorgan Russian Securities Investment Trust

SPTR 1 year 8.6%, 3 years 81.6%, discount -17.5%, yield 5.1%

Russian equities look cheap heading into 2019, but a word of warning: in previous years they have also looked cheap as chips and this has not translated into strong returns. In short, Russia is home to some of the world’s largest energy companies, so its overall stockmarket performance is heavily reliant on the movements of the oil price. John Newlands says JPMorgan Russian Securities Investment Trust (LSE:JRS) is his contrarian choice, as Oleg Biryulyov is an expert manager.

He has run the fund since 2002. "The wide discount (17%) offers a useful element of downside protection," adds Newlands.

Defensive plays

First State Global Listed Infrastructure

TR 1 year 2.4%, 3 years 51.4%, yield 3.3%

Infrastructure has monopoly-like qualities that provide stability through an economic cycle. Therefore, it is perhaps no surprise that in potentially the latter stages of a bull market our experts have selected three infrastructure specialists. Broomer picks First State Global Listed Infrastructure out, noting that the investment team keeps a close eye on preserving capital.

He adds:

"This focus and the natural defensiveness of this asset class mean this is a strategy that could potentially weather any market turbulence well."

The Renewables Infrastructure Group Investment Trust

SPTR 1 year 15.5%, 3 years 37.7%, premium 6.5%, yield 5.7%

The Renewables Infrastructure Group Trust (LSE:TRIG) invests for a high and consistent income stream in wind, solar and battery storage projects. Most of its portfolio is in the UK, with 44% in Scotland, and over 70% in onshore wind. Tim Cockerill of Rowan Dartington likes it because managers InfraRed Capital Partners are very experienced, and the income is partially inflation-linked. "It works well as a diversifier in a portfolio, with the majority of the return coming from income," he says. The premium stands at 6.5%, but this is lower than most other infrastructure-focused trusts. (2019 Money Observer Rated Fund)

Polar Global Insurance

TR 1 year 7.5%, 3 years 53.9%, yield 0%

Polar Capital Global Insurance was tipped last year and has once again been backed for 2019. As the name suggests, it specialises in the insurance industry worldwide, with the big draw being the sector's low correlation with equities. Yearsley adds:

"The insurance cycle moves very differently from the economic cycle. It won't shoot the lights out, but it provides an interesting and differentiated ballast."

Other specialist plays

BlackRock Gold and General

TR 1 year -15.6%, 3 years 47.4%, yield 0%

There are certain investments that over the years have proved their value in protecting portfolios from volatile markets. Gold is viewed as the ultimate safe haven, and typically forms a small part of a more conservatively positioned multi-asset portfolio. BlackRock Gold and General, managed by Evy Hambro and investing in shares of companies mining gold and precious metals, is deemed the standout choice.

Husselbee adds:

"This fund is not exactly an investment in the ups and downs of the gold price, but it has provided diversification from stockmarkets in the past."

BH Macro Investment Trust

SPTR 1 year 18.6%, 3 years 16.5%, discount -1.8%, yield 0%

Our second specialist trust invests exclusively in Brevan Howard Master Fund, a hedge fund focused on currencies and fixed interest. It has been managed since launch by the eponymous Alan Howard. BMO's Peter Hewitt likes the BH Macro Investment Trust (LSE:BHMG) because the widespread phasing out of quantitative easing is resulting in greater volatility in interest rates and foreign exchange, which gives it far more investment opportunities. It has also trimmed its fees and brought in discount controls.

Menhaden Capital Investment Trust

SPTR 1 year -4.1%, 3 years -28.8%, discount -29.8%, yield 0%

Menhaden Capital (LSE:MHN) was launched in 2015 to invest in businesses delivering or benefiting from the efficient use of energy and resources. John Newlands believes it has not yet reached anything like its full potential. He says:

"The trust has thus far failed to generate asset growth and has fallen completely out of favour. Yet it has a committed and high-calibre management team and board that will eventually produce results and make the present discount rating look silly."

Property

TR Property Investment Trust

SPTR 1 year 4.5%, 3 years 41.5%, discount -2.4%, yield 3.3%

Following the open-ended property fund debacle that took place in the wake of the Brexit vote, our experts on the whole advocate going down the investment trust route when it comes to property.

In short, in times of stress, open-ended property funds have a liquidity mismatch in that they cannot sell properties quickly enough to meet investor withdrawals. They therefore have to hold a lot of cash against this eventuality.

The closed-ended investment trust structure does not have this problem. Sandy Cross of Rossie House picks TR Property Investment Trust (LSE:TRY) which holds mainly property shares, as his preferred choice:

"The manager is highly regarded; the trust is a good option for those wishing to hold property." (2019 Money Observer Rated Fund and interactive investor Super 60 fund)

Secure Income Real Estate Investment Trust

SPTR 1 year 8.9%, 3 years 54.5%, premium 1.2%, yield 4.1%

Secure Income Real Investment Trust (LSE:SIR) specialises in generating long-term, inflation-protected income from real estate investments. It owns 177 properties, based predominantly in England. Most are let to private hospitals, theme park operators or Travelodge hotels, with average lease lengths of 23 years and no tenant break clauses. Hewitt says: "Rents are mostly inflation-linked or with upward-only reviews. The name Secure Income says it all."

PRS Real Estate Investment Trust

SPTR 1 year -0.6%, 3 years n/a%, premium 3.9%, yield 5.1%

The second REIT tipped by our panellists constructs and then rents out new-build homes for families with average incomes (c£30,000- £35,000 a year). Most of the existing portfolio is in North West England, but declining land prices are creating opportunities in the South. Charles Murphy says:

"PRS Real Estate Investment Trust (LSE:PRSR) has committed to 5,100 new homes, of which 595 have been completed. PRS currently pays a 5% dividend yield and the dividend is expected to rise steadily on the back of rental value growth."

Note: (SP)TR = (share price) total return.  All performance data as at 1 December 2018. 

Our fund and trust tips panels

Our fund experts:

Kelly Prior is an investment manager in BMO Global Asset Management's multimanager team. She joined the group from Thames River Capital in 2007.

Brian Dennehy is managing director at advisory firm Dennehy Weller. He also runs FundExpert, which provides research and insights for self-directed investors.

Mick Gilligan joined Killik & Co in 2001 and became a partner in 2004. He was previously an investment specialist at a private client advisory business.

Jason Broomer has more than two decades' experience in fund research. He runs Square Mile's portfolio service.

John Husselbee is head of the Liontrust multi-asset team. He has more than 25 years' experience in managing multi-asset portfolios.

Ben Yearsley is a director at Shore Financial Planning. He was formerly head of investment research at Charles Stanley Direct.

Our trust experts:

Tim Cockerill is investment director at wealth manager Rowan Dartington, which is part of St James's Place. It is responsible for client assets in excess of £1.5 billion.

Sandy Cross is a partner at Rossie House Investment Management, which has long favoured investment trusts for private client portfolios. He joined RHIM in 2012.

John Newlands worked for nearly a decade as head of investment companies research at Brewin Dolphin. He is founder of Newlands Fund Research.

Peter Hewitt has managed the BMO (formerly F&C) Managed Portfolio trusts since 2008. He joined F&C in 1999.

Charles Murphy is head of listed investment companies analysis at Panmure Gordon, which he joined in November 2012.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.