Wealth managers have revealed five lesser-known funds they are backing to outperform peers this year, in an environment where some major equity and bond markets looked stretched.
Tim Cockerill, head of collectives research at Rowan Dartington
Henderson Opportunities Investment Trust
This is a fund which has a lot of potential but it is not one for cautious investors.
It is managed by James Henderson who has considerable experience in the area where this fund invests - predominantly mid-cap and small-cap stocks. Its universe is higher risk but it is also a small fund, around £50m, and can become illiquid at times of stress.
It is also geared (12%,) another factor adding to its risk.
However, it is trading on a 17% discount, which is attractive, although this has narrowed recently from over 25%.
Risk is also mitigated through a diversified portfolio of 80 stocks, which is not overly concentrated in the top ten.
Henderson is a bottom up stock picker and prepared to take considered risks - when they work the rewards can be great. For example, Oxford Catalysts, one of the top ten holdings, has risen by over 250% in the past 12 months.
George Bromfield, investment management director at Brooks Macdonald
Charlemagne Emerging Market Dividend
Managers Mark Bickford-Smith & Julian Mayo run the fund with a clear bottom-up style, looking to build a portfolio of 40 to 50 stocks, focusing on highly cash generative businesses which have strong franchises and good management.
The portfolio is constructed on two levels; the first consisting of around 8 to 12 stocks, which are higher yielding and generally defensive idea.
The second consists of sustainable growth ideas, which all pay out reasonable dividends. The approach is unconstrained, but a firm eye is kept on controlling overall portfolio risk by ensuring the portfolio is diversified at a sector and country level.
The two lead managers are supported by an experienced group of 13 analysts and the strategy is very much built on a strong team.
The approach has worked well and in 2012 the fund returned 20.7% in 2012 in sterling terms, a 7.6% outperformance of the MSCI Emerging Market Index, which puts the fund in the top decile in its sector.
Peter Sleep, senior portfolio manager at Seven Investment Management
BNP Paribas Best Selection Europe fund
It is not one manager who is the star, it is two or three managers working with a number of analysts that travel the world making sure business models work.
Their strategy has really paid off any way you look at it; they have done well in up and down markets.
They have a style of investing that is very value driven. It is not just about dividends or quality, they do not mind buying cyclical stocks at the right price.
To aid regulatory reporting
Three year strategic review
Impact on markets
Has run Cautious Managed fund since 2011
What’s right – not what sells