Fund Spotlight: five funds to bring lasting value in 2025

Parents

Fidelity Special Values

For those looking for a bargain gift for loved ones consider the exciting growth potential offered by the undervalued companies across the UK market.

Fidelity Special Values Ord (LSE:FSV)is a UK investment trust that seeks to find unjustly cheap companies that are due a change in fortunes. The trust has been managed by Alex Wright since September 2012. He is supported by co-manager Jonathon Winton and the extensive analyst team at Fidelity who have contributed to the long and successful track record of this strategy.

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Its contrarian approach seeks to invest in companies across all sectors before any wider recognition of changes in fortune, whether in operational results or sentiment. The portfolio is made up predominantly of UK-listed equities, although up to 20% of total net assets can be held in non-UK listed stocks.

Key to its approach is Wright’s focus on undervalued names. Broadly, FSV seeks companies trading at lower multiples (generally a price/earnings ratio of well under 15x) where the market is yet to realise the future value. This bias leads Wright to typically look outside the FTSE 100 index for opportunities. Currently, the allocation to small- and mid-cap stocks is just short of two-thirds of the portfolio.

FSV’s shares are currently trading on an -8% discount, which is wider than the five-year average discount of 5%, presenting an attractive entry point for investors.

Grandparents

Invesco Sterling Bond

Those close to or in retirement are typically on the lookout for income-producing investments. Therefore, a bond fund may make the ideal gift for grandparents, such as the Invesco Sterling Bondfund. It has been managed by Michael Matthews since 2006, now alongside Tom Hemmant, and takes a flexible approach to generating income and capital growth from sterling-denominated debt.

While central banks across the UK and other developed regions navigate the early stages of interest-rate cutting cycles, in the autumn of 2024 escalating geopolitical tensions, critical elections and prospects of increased government borrowing have meant that both government and corporate bond yields are still yet to fall from attractive levels.

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The flexibility allows the fund managers to invest predominantly across sterling investment grade (IG) bonds but can also allocate to some sub-IG issuances and includes subordinated debt. Managers look both at the fundamentals underlying an issuing company, as well as taking a macro view to guide positioning.

The fund currently favours bonds issued by the financial sector, and there is also a notable bias towards shorter duration bonds, lessening the sensitivity of the fund to changes in interest rates.

The fund’s yield of over 4.2% is attractive. Total returns over the long run have been impressive versus both peers and benchmark.

Siblings

Janus Henderson Global Sustainable Equity

For a sibling who is looking to align investments with personal values there are plenty of sustainable fund options you could gift, which you can browse on our screener on the Research Hub.

At the same time, there is the opportunity to also benefit from a subtle shift that appears to be taking place, with investment returns broadening over the past quarter across a range of sectors, moving away from large technology and growth stocks towards previously less popular small mid-cap stocks. Sectors such as utilities and financials are rebounding as interest rates decline globally.

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The Janus Henderson Global Sustainable Equity fund is well-positioned to capture this market dynamic. Managed by Hamish Chamberlayne, the fund invests in companies delivering long-term growth while driving positive environmental and social change. The portfolio of 50 to 70 stocks employs a GARP (growth at a reasonable price) strategy, emphasising mid-caps in technology, industrials, and financial services. Sustainability is central, with holdings aligned to themes such as decarbonation, resource efficiency and social development.

Recent portfolio shifts include reducing positions in tech giants such as NVIDIA Corp (NASDAQ:NVDA) and Microsoft Corp (NASDAQ:MSFT) to mitigate concentration risks, and reallocating to diversified artificial intelligence (AI) ecosystem players such as ASML Holding NV (EURONEXT:ASML) and nVent Electric (NYSE:NVT). Strong performance highlights include a five-year return of 80%, outperforming peers in the global large-cap growth category by +22%.

With its disciplined investment process, sustainability focus, and robust long-term outlook, the fund could be a compelling choice for an investor seeking to expand the quality global equity exposure in their portfolio.

Kids

iShares Ageing Population ETF

When investing for children, you can afford to be adventurous due to the long timescale involved. One area to consider is mega-trends, such as cloud computing and big data, urbanisation, and climate and clean energy.

Another trend to consider tapping into is the changing demographics of the global population via the iShares Ageing Population ETF USD Acc GBP (LSE:AGES). The ETF tracks the performance of companies that provide products and services to the world’s ageing population, defined as people aged 60 and above. Those in this age group are predicted to number more than two billion by 2050.

With the help of technology and better medical services, the ageing population is healthier for longer and can enjoy extended retirements. This demographic shift presents challenges, but also offers unique investment opportunities to be captured in the healthcare, financial services, and leisure sectors that cater more to the elderly. 

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The portfolio has more than 340 holdings and allocates nearly 90% to healthcare, financial services and insurance sectors, with more than half invested in US shares. Since its inception in September 2016, the fund has grown to over £300 million in assets under management and generated a total return of nearly 70%. It’s competitively priced with a yearly ongoing charge of 0.4% and is listed on the London Stock Exchange. 

The iShares Ageing Population ETF offers targeted exposure to the ageing population - a long-term structural trend. Given how concentrated the ETF is in sector terms, its performance could be volatile, making it a higher-risk option for investors and suitable as a satellite position in a well-diversified portfolio. 

Partners

Guinness Asian Equity Income

If your partner is looking to diversify their portfolio, the Guinness Asian Equity Income fund offers exposure to an exciting region for 2025 and beyond. Managed by Edmund Harriss and Mark Hammonds, the fund offers a high-conviction approach to investing in dividend-paying Asian companies. The 36-stock portfolio is equally weighted, reducing risk of exposure to a single name and offering differentiation versus the benchmark.

The team look for companies with strong returns on capital and scope to grow dividends. It is overweight China (38.4%) and is otherwise well diversified across other Asia-Pacific countries. The yield of 3.8% is among the top in its peer group and performance has been very strong over both the short and long term.

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Asian markets face both challenges and opportunities. The region has benefited from early signs of a recovery in China, its largest economy, as the market reacted positively to stimulus measures imposed following a period of declining valuations and poor sentiment.

While the threat of US tariffs for exporters looms under Trump, Guinness Asian Equity Income’s portfolio is positioned towards companies that are exposed to the economics and trade of the APAC region. In fact, only about 10% of revenues for portfolio companies stem from the US, making the fund a good option to diversify away from a concentrated US market.

Source: Morningstar. Total Returns for funds/Market returns for ETF (GBP) to 30/11/2024. Past performance is not a guide to future performance.