ISA tips: around the world in eight funds and trusts in 2024

By investing in open-ended and listed funds, British investors can easily take stakes in businesses from all over the world, from India and America, to China and beyond.  

That’s incredibly important for diversification and returns. Just look at the difference between how American and UK shares have performed over the past 10 years: on a total return basis, the S&P 500 is up 314% and the FTSE All-Share index is up 68%.  

A year on from our last trip around the world, for the 2024 ISA season we take a fresh look at eight expert-selected fund and investment trust ideas for different global regions and countries. 

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India 

The Indian stock market is one of the hottest in the world right now. Investors are excited by its young and large population (at 1.4 billion people, it’s about to overtake China’s population), entrepreneurial companies and democratic governance.  

This has led to a 50% gain for the MSCI India index over the past three years in sterling terms, and even better returns for some actively managed funds.  

One is Ashoka India Equity, an investment trust whose shares are up 74% over the same period.  

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Darius McDermott, managing director at fund research group FundCalibre, makes this trust his top pick for Indian equities.  

He says: “Ashoka India Equity has the biggest analyst team on the ground among its peers, which is essential for navigating such a large and varied emerging market. The team prioritises companies benefiting from the long-term growth of the economy – fuelled by a thriving middle class with purchasing power, and the country’s excellence in sectors such as IT and healthcare.” 

Another popular India fund on the ii platform is Jupiter India, which has risen 99% over the same period. It has broken into ii’s most bought open-ended funds over the past 12 months as India’s popularity has risen among investors.  

Europe 

The Continent is home to leading luxury, pharmaceutical and consumer shares, as well as a number of large technology stocks.  

McDermott says CT European Select is a strong option for investors. Its largest positions are Novo Nordisk, LVMH and ASML. 

All are leading companies in their fields. Dutch firm ASML is the only company capable of producing the most advanced “lithography” machines to print semiconductors. LVMH is the world’s largest fashion group, owning brands such as Louis Vuitton and Moët Hennessy. Novo Nordisk is behind weight-loss drugs Ozempic and Wegovy.  

McDermott says: “For those seeking European large-cap exposure, CT European Select is an excellent option. This fund employs a patient investment approach that has repeatedly proven itself. Lead manager Ben Moore’s unwavering focus on quality growth has enabled the fund to achieve strong returns with lower volatility than its peers, making CT European Select a core holding for any European equity portfolio.” 

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Another option for European shares, according to McDermott, is IFSL Marlborough European Special Situations fund. 

He says this is a “true stock picker” fund, as manager David Walton delves deep to discover the continent’s compelling but under the radar long-term growth stories.  

“Offering access to much smaller companies than many of its peers, the team has built a stellar track record in this space while successfully navigating the inherent risks associated with investing in this market cap,” said McDermott. 

Companies in this portfolio are generally valued at less than £1 billion, with around a quarter considered “micro-cap”, which brings added volatility but also opportunity to catch companies at the beginning of their lives.  

UK 

British shares also deserve a place in investors’ portfolios. Not only do they trade at discounts to international peers, but their shares and dividends are priced in pounds, so investors are not exposed to foreign exchange risk.  

Two that stand out to give a mix of large and small companies, according to ii's head of funds research Dzmitry Lipski, are Henderson Smaller Companies and Lindsell Train UK Equity. Both are members of our Super 60 list of rated funds.  

Investing in small UK firms, Henderson Smaller Companies counts housebuilder Bellway, pub owner Mitchells & Butlers and publisher Future Plc among its top holdings. An investment trust, it trades at a 13% discount to net asset value, which could appeal to value hunters.  

Lipski says: “This trust benefits from an experienced investment team and an established process that has been consistently implemented. It offers a good option for investors looking for UK small and mid-cap equity exposure with a growth bias.” 

The trust is managed by Neil Hermon, who has been at the helm since 2002. He is directly supported by two further managers/analysts, the last of whom joined him in 2017, and the wider resources at Janus Henderson. 

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For investors looking for larger UK shares, star manager Nick Train’s Lindsell Train UK Equity fund is worth a look. Its top positions include international giants RELX, Diageo and Unilever. Although UK listed, they generate revenue from all around the world.  

Train’s approach is to buy firms with unique products and services that should stand the test of time and keep growing their profits.  

Lipski says: “Train targets companies that fulfil strict criteria, including a proven track record, a large and growing business franchise, high barriers to entry, strong financial characteristics (including net cash on the balance sheet), a track record of producing a high return on capital, and low capital intensity. 

“We believe a key strength lies in Train’s deep understanding of company strategies and his ability to see through the noise and buy stocks that are best placed to defend their businesses over the long term.” 

China 

China is not for the faint-hearted, but the communist state does give investors access to a stock market largely uncorrelated from the rest of the world, a huge consumer market and leading technology stocks.  

A simple way in is via Fidelity China Special Situations, an investment trust focused on profiting from the emerging middle class in China. Its largest positions include listed firms Tencent Holdings Ltd (SEHK:700) and Hisense Home Appliances Group (SEHK:921), as well as unlisted firms Pony AI and Bytedance.  

Shares in Chinese firms are cheap, which may add to their appeal. Trading at an 11% discount to NAV, FCSS shares have dropped by one-third in value over the past 12 months.  

As of the end of 2023, the price-to-earnings (p/e) ratio of the MSCI China index is just 11.7x, which is lower than the 14.5x of the MSCI Emerging Markets index and the 19.8x of the MSCI All Country World. 

The MSCI World index, which does not include Chinese shares, is on a p/e of 20.7x, meaning that Chinese shares are at a 56% discount to global shares. UBS puts this discount at one of its widest in nearly two decades, with the 2012 to 2016 period also standing out. 

Lipksi says: “The trust benefits from an experienced and thorough manager in Dale Nicholls. He has proven ability in extracting value from a research team that is extensive and provides a high level of support in terms of idea generation and fundamental research. The trust is therefore viewed as a high-quality option in the China equity space, however, investors should also be aware of the heightened risks posed by small-caps, unlisted companies and the structural gearing.” 

America 

Jupiter Merian North American Equity, a member of ii’s Super 60 list, gives investors access to more than 150 US shares including tech giants Apple, Nvidia and Microsoft.  

The fund uses a quantitative approach, underpinned by research by a fund management team. The process draws on five distinct factors, including a component which considers momentum trends and short-term signals, and dynamic valuation which enables the model to shift between value and quality to reflect the changing market dynamics. 

This approach aims to shift the portfolio into stocks that should perform well as the market backdrop changes.  

Lipski says: “The fund benefits from a solid management team and a well-designed quantitative investment process.” 

He adds that a key strength of the fund has been the team’s flexible and dynamic approach to stock selection, which has helped the fund mitigate the risk of underperformance during periods of market inflection, a key risk often associated with funds that utilise a quantitative investment process. 

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Japan  

Rounding off our world trip is Japan, where the stock market is booming. The Nikkei 225 index of its largest firms has risen 12% over the past 12 months, and by 5% so far in 2024, in sterling terms. Due to a strengthening yen, returns in local currency are far greater, at 37% over 12 months and 14% this year.   

McDermott points investors towards Baillie Gifford Japanese Income Growth. Launched in July 2016, this fund aims to benefit from the improving corporate governance in Japan, as more businesses move towards a progressive dividend-paying policy.  

McDermott says: “Managed by Matthew Brett and Karen See, this fund is reasonably concentrated at 45 to 65 holdings, and will have a natural mid-cap bias. As the team has a total return mindset, rather than a pure income-seeking mandate, it does differentiate this fund and the stocks it will buy.”