Regional fund and trust tips: The hunt for great returns

Our 11-strong panel of experts share their growth, income and wildcard tips for 2020.

United States

Artemis US Extended Alpha

TR 1 year 15.9%, 3 years 48.4%, yield n/a

The US stock market is the largest in the world and the most widely researched, which makes it notoriously difficult for active managers to gain an edge over a simple low-cost tracker fund. However, Artemis US Extended Alpha which was also tipped last year, has strong performance numbers over the past five years, up 123% versus 85% for the average US fund.

It is a long/short fund, meaning it has the ability to profit from falling share prices – a key attraction against a pricey valuation backdrop. Ben Yearsley cautions against “going in all guns blazing” in relation to US exposure.

A Money Observer Rated Fund 2020

Marlborough US Multi-Cap Income

TR 1 year 22.7%, 3 years 49.7%, yield 1.4%

FundExpert’s Brian Dennehy is also wary of what he calls “a very expensive US market”. He adds that we are heading into an election year, so volatility is likely to increase. A fund he likes, which has momentum at the moment (with strong one-year performance numbers, gaining 10% more than the average US fund) is Marlborough US Multi-Cap Income.

This small fund, with only £64 million of assets, has most of its money at present in “mega” or “large” companies, representing over 80% of the portfolio.

Wildcard

JP Morgan US Smaller Companies IT

SPTR 1 year 8.6%, 3 years 39.3%, yield 0.7%

Managed by a New York-based team of three, led since 2008 by Don San Jose. They invest for growth in US smaller companies, and JPM UK Smaller Companies boasts the best five - and 10-year net asset value returns of any US trust. Philippa Maffioli of Blyth-Richmond says:

“The managers aim to invest in companies with a substantial competitive advantage.”

The trust’s benchmark is the small company Russell 2000 index, which represents the bottom 10% by market capitalisation of all quoted companies in the US.

A Money Observer Rated Fund 2020

Europe

(Jupiter) European Opportunities IT

SPTR 1 year 12.7%, 3 years 62.1%, yield 0.7%

Longstanding manager Alexander Darwall recently established his own fund management company and has taken the mandate with him. This, though, has not put off our panellists from favouring Jupiter Emerging European Opportunities. Philippa Maffioli says:

“Darwall’s objective is to discover companies he considers special, and his performance has been stellar.”

Peter Hewitt adds: “Over the years Darwall has achieved some great returns and I expect this to continue.” Darwall favours a concentrated portfolio with minimal turnover.

A Money Observer Rated Fund 2020

BlackRock Continental European Income

TR 1 year 13.7%, 3 years 33.0%, yield 4.2%

Square Mile’s Victoria Hasler describes BlackRock Continental European Income as “sensibly managed” and one that “should not produce too many surprises for investors”. She adds:

“The manager seeks to invest in attractively valued European companies where he believes there is potential for dividend growth or dividend yields, and in managing this fund, an active and flexible investment approach is adopted.”

The fund, which boasts substantial assets under management of £1.7 billion, has nearly a third of its money in the shares of companies based in France.

Wildcard

Barings Europe Select

TR 1 year 13.4%, 3 years 36.6%, yield 1.5%

Liontrust’s John Husselbee likes this small-cap portfolio Barings Europe Select run by Nick Williams because it largely avoids Europe’s exporters. “We expect exporters will continue to be mixed up in the trade war situation for some time to come,” he adds. At least 75% of the port- folio is invested in small-sized shares, which makes it a racier option, but as various academic studies have shown, over the long term small shares beat large. But it is important to be patient.

Japan

Man GLG Japan Core Alpha

TR 1 year 0.8%, 3 years 12.3%, yield 2.1%

Do you go for value or growth in Japan at the start of 2020? “It is a difficult call,” notes Ben Yearsley, but he has come down on the side of value simply because valuations look so cheap. To profit from a value resurgence he picks out this fund, which has been managed by Stephen Harker since 2006. He adds: “Man GLG Japan CoreAlpha is a core large-cap fund that fishes in the value and deep value pool.” It was also tipped last year.

CC Japan Income & Growth IT 

SPTR 1 year 6.8%, 3 years 43.8%, yield 2.5%

Targets an attractive yield plus capital growth. Has impressed since launch in 2015, with three-year net asset value returns ahead of its Topix benchmark, despite a difficult 2018. Gearing is high, at 22%. Peter Hewitt says:

“Manager Richard Aston is a really good value-oriented stock-picker, and dividend growth prospects look promising.”

CC Japan Income & Growth (LSE:CCJI) offers a route to capitalise on improving corporate governance in Japan.

Wildcard

Legg Mason IF Japan

TR 1 year 11.8%, 3 years 54.9%, yield n/a

Legg Mason IF Japan, managed by Hideo Shiozumi, has been the ultimate long-term wildcard, points out Liontrust’s John Husselbee. He adds:

“The fund focuses on companies exploiting the country’s service and retail/distribution transformation, and while it can post volatile numbers year to year, the long-term performance has tended to be attractive.”

Shiozumi has almost 50 years’ investment experience. The fund has a bias towards small and medium-sized companies operating in profitable niches.

A Money Observer Rated Fund 2020

Asia Pacific

Fidelity Asia Pacific Opportunities

TR 1 year 19.2%, 3 years 49.2%, yield 1%

A strong performer over the five years that Anthony Srom has been managing Fidelity Asia Pacific Opportunities, with returns of 109% against 54%
for the wider sector average. This is a high-conviction fund, with just 25 holdings. BMO’s Kelly Prior is impressed, she says:

“This is an unconstrained focused portfolio with no definitive style bias, though in practice it has a tilt towards growth, always with an eye to valuation. Something of a lone wolf within the well-oiled Fidelity investment machine, Anthony Srom believes in backing his judgement.”

Schroder Asian Income

TR 1 year 8.1%, 3 years 24.2%, yield 3.6%

A stronger performer over the past decade, Schroder Asian Income gives investors access to the Asian dividend story, based on strong themes such as reform-minded governments, growing middle classes, young demographics and countries with lower debt burdens than their developed counterparts. Fundexpert’s Brian Dennehy adds:

“The fund has increased the dividend it pays to investors in seven of the last 10 years.”

Wildcard

Pacific Assets IT

SPTR 1 year 4.4%, 3 years 28.2%, yield 1%

David Gait of Stewart Investors has been at the helm since 2010. His aversion to China has adversely affected its three-year performance, but two panellists are backing a return to form. Tim Cockerill likes “its strong sustainability, and its very good long-term record”, while Charles Macdonald says Pacific Assets (LSE:PAC) portfolio’s focus on domestic consumption makes the trust “an excellent way to capitalise on long-term prospects as the Asian consumer comes of age”.

A Money Observer Rated Fund 2020

Emerging Markets

Fidelity Emerging Markets

TR 1 year 12.9%, 3 years 36.9%, yield n/a

Square Mile’s Victoria Hasler describes Fidelity Emerging Markets as “an attractive option for investors seeking a sensible strategy that focuses on identifying firms with a strong market position and able to deliver significant total returns for shareholders”.

She adds that the resources supporting the fund manager are very impressive, with Fidelity boasting a large team of experienced emerging markets analysts.

A Money Observer Rated Fund 2020

Utilico Emerging Markets IT

SPTR 1 year 15.1%, 3 years 25.2%, yield 3%

Another that was tipped last year and makes a repeat appearance. Utilico Emerging Markets (LSE:UEM) invests for total returns in a concentrated portfolio of companies in infrastructure, utility and related sectors, mainly in emerging markets. Charles Jillings has led the management team since 2005, and has achieved impressive 10-year returns. Charles Macdonald says:

“The trust provides a relatively steady way of playing more exotic markets, and a useful income.”

A Money Observer Rated Fund 2020

Wildcard

Fidelity Index Emerging Markets

TR 1 year 6%, 3 years 24.3%, yield 2.2%

Killik’s Mick Gilligan says emerging markets look attractively valued compared with developed markets and relative to their own history, so therefore it may pay to simply buy the index using a passive fund such as Fidelity Index Emerging Markets.

“This fund provides very broad exposure (1,200 plus stocks) to global emerging markets and at a low cost of 0.2% a year.”

A Money Observer Rated Fund 2020

Our wildcard tips explained

For each category, we asked our experts to make a ‘wildcard’ pick. The aim is to offer ideas for out-of-favour funds where a change in fortunes is expected, flagging them as value opportunities. For investment trusts, the bargains are easier to spot (by assessing the discount relative to its historic highs and lows), whereas for open-ended funds, it is more of an art than an exact science.

We introduced the wildcard selection last year and on the whole our experts’ choices for 2019 fared well, with nine of the 11 selections across all the expert tips pages in positive territory. Click here for full Wildcard performance details and commentary.

Our fund and trust tips panellists

Our fund experts:

Ben Yearsley is a director at Shore Financial Planning. He formerly worked at Charles Stanley Direct and Hargreaves Lansdown.

Kelly Prior is an investment manager in BMO Global Asset Management’s multi-manager team, which is headed up by Rob Burdett and Gary Potter.

Mick Gilligan joined Killik & Co in 2001 and became a partner in 2004. He specialises in fund research.

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

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

Victoria Hasler is head of research at Square Mile. Before joining Square Mile, Victoria worked for a Brewin Dolphin as a fund analyst.

Our trust experts:

Tim Cockerill is investment director at wealth manager Rowan Dartington, which is part of St James’s Place. 

John Newlands was head of investment companies research at Brewin Dolphin. He now runs Newlands Fund Research.

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

Charles MacDonald is a partner at Rossie House Investment Management, which favours trusts for private client portfolios.

Philippa Maffioli joined Blyth-Richmond Investment Managers in 2001. She works with her father, who founded the business.