Advisers and multi-managers tell Maria Merricks which funds they are backing for adventurous, balanced and cautious investors this year
Doug Millward, investment analyst, Lowes Financial Management
In the UK sector, we like Standard Life UK Equity Unconstrained. The manager focuses on firms he believes will see a positive change in sentiment from the markets, which will drive the share price upwards. As the fund doesn't operate a specific style, the manager has the flexibility to adapt to the market environment, which helps deliver consistent performance. There are also no limitations with regard to index weightings, company size or where it invests.
In the Global sector, we like Baillie Gifford Global Discovery. This small-cap fund invests in immature businesses, as the team believes that, at that stage, the market's understanding of the company's growth potential is least developed. In a recovering global economy, the environment, as well as the company's unique potential, should bring them success. While investing in immature businesses is higher risk, the fund invests across several different sectors to provide diversification.
Rob Burdett, co-head of multi-manager, F&C Investments
James Thomson has spent ten years in charge of Rathbone Global Opportunities. Over this period, it is the second best in its IMA Global sector; so, "some room for improvement," as Thomson dryly put it on his tenth anniversary call.
It is a go (almost) anywhere, bottom-up, thorough stock-picking fund. Thomson focuses on calculated risks for high returns; however, reliable defensives make up around 20% of the portfolio, in order to offset the more exciting growth stories, even if we enter more racy markets.
Mid-caps are the "bread and butter" of the fund. Thomson likes companies undertaking gentle innovation - such as moving online, for example - rather than game-changers, where there is more potential for them to go wrong.
The fund remains a manageable size, at a time when investors are paying attention to the potential risk and limitations of those with a large number of assets.
Mike Horseman, managing director, Cockburn Lucas
For an investor looking for a passive product with a 60%-40% bias between equity and fixed income, Vanguard Life Strategy does exactly what it says on the tin. It enables investors to cap equity risk at 60% on a global basis. With an AMC/TER of 0.31%, it suits this space or those looking for a simple buy and hold strategy.
In the active multi-asset world, I'm backing Marcus Brooks and Robin McDonald's Cazenove Multi-Manager Diversity. The duo will remain at the helm of the soon-to-be-rebranded offering, using both the Schroders and Cazenove teams' tactical and strategic asset allocation process, with consistency and inflation-beating returns at its heart.
Meanwhile, although this fund could sit at the higher end of the risk spectrum, I like Newton Asian Income. While it has pulled back in the face of the recent emerging markets sell off, I believe in the longer term story for this market and, as such, the fund remains a core buy for our equity allocations.
James Bateman, head of portfolio management, Fidelity Solutions
Adrian Frost and Adrian Gosden's Artemis Income focuses on companies' ability to generate free cashflow. They're particularly interested in business models where cashflow is sustainable and growing. Boasting a strong long-term track record, it diversifies across economic sectors, and is able to invest up to 20% in European equities and 10% in bonds.
Richard Woolnough has run M&G Optimal Income since its launch in 2006. The fund has a particular focus on income, which means it holds a higher proportion of high yield bonds than similar funds in its sector. It has a low exposure to bonds issued by banks and other financial institutions, which may appeal to cautious savers.
Michael Clark, manager of Fidelity MoneyBuilder Dividend, believes companies that consistently deliver dividend growth will outperform in the long term. He looks for safety of income at a reasonable price, and companies must be well-financed and cash generative. The fund contains 60 holdings, the top ten accounting for over 40% of the portfolio. Larger investments tend to be large/mega-cap, high yielding stocks, reducing the overall risk.
Darius McDermott, managing director, Chelsea Financial Services
Those cautious investors who need and/or want some equity exposure but think markets have gone a bit too far could look at the Investec UK Special Situations fund. Manager Alastair Mundy has a very disciplined value approach and does not get caught up in market hysteria, so it has been very good at preserving capital in the past.
Meanwhile, an idea for someone wanting to diversify their income stream away from bonds but not wanting to take on the higher risk of equities is the Henderson UK Property trust. Property as an asset class adds diversification to an overall portfolio and this fund, in particular, has one of the best yields among its peers, while boasting low volatility. The manager really focuses on the quality of tenants and the fund has an impressively low void rate as a consequence.
Marcus Brookes, head of multi-manager at Schroders
We are not keen on fixed income and have not been for some time now. We think bonds, on both the government and corporate fronts, look expensive and, as a result, all of our multi-manager funds are extremely underweight.
However, M&G Optimal Income, managed by Richard Woolnough, remains our top pick and we would expect it to outperform its peers even in this current difficult environment. It currently has a strong bias towards investment grade corporate bonds, accounting for around half its portfolio, but it also holds government bonds, high yield credit and even some equities.
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Entry deadline: Friday 28 September 2018
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