Jason Hollands, Managing Director at Tilney Bestinvest comments on the funds that proved most popular with clients using Tilney Bestinvest’s Online Investment Service in December.
1. Stewart Investors Asia Pacific Leaders
Manager Angus Tulloch had a good 2015 in what was a very turbulent year for Asian markets and also recently topped our Top 100 Fund Managers report which identified the equity fund managers with the strongest full-career track records in their sectors. The veteran investor’s cautious style rewarded investors with his Asia Pacific Leaders fund staying afloat as its MSCI Asia Pacific ex Japan benchmark sank.
It has recently been announced Tulloch will step down from lead management of the fund next summer, while remaining part of the Stewart Investors investment team. As Asian equities look set to remain volatile over 2016 – in the first week of trading in 2016 alone the Chinese domestic stock market fell sharply twice – investors should be reassured that Tulloch is handing the baton to David Gait, a manager with a very strong track record in his own right who also ranked high up in our Top 100 Fund Managers report.
2. Liontrust Special Situations
This fund has been a strong and consistent performer since its launch in 2010 and it showed no sign of letting up in 2015, outperforming its benchmark, the FTSE All-Share Index, by 10.8% over the course of the year. The “Economic Advantage” process pursued by managers Anthony Cross and Julian Fosh targets growth companies, whether large, medium sized or small, with strong attributes such as ownership of intellectual property, excellent distribution chains and recurring revenues streams, that make them resilient and provide high barriers to competition. Although future performance can never be guaranteed, the fund has a particularly strong record in tougher markets as well as the good times.
3. CF Woodford Equity Income
As Britain’s best-known fund manager the opinions of Neil Woodford have clout with many investors, and they would have been interested to read his scathing views on the Bank of England’s Monetary Policy Committee recently. He holds deep concerns that the UK will see further negative inflation within the next two years as a result of policy being insufficiently stimulatory, and as such manages his Equity Income fund with a cautious medium-term outlook that he believes will see investors through any global economic headwinds.
4. Threadneedle UK Equity Income
The UK equity team at Columbia Threadneedle foresee a low growth, low return world in 2016 and expect active, “old school” stock picking based on an assessment of company fundamentals and valuations to work well. Richard Colwell, manager of the Threadneedle UK Equity Income fund, is a pragmatic investor without a dogmatic style, who manages the fund to deliver attractive overall returns, rather than a primary focus on dividends. Relatively concentrated at 51 holdings in size, the fund has key holdings in Imperial Tobacco, Astrazeneca and WM Morrison Supermarkets. Colwell has previously stated that he expects the recent spate of large mergers and acquisitions to continue for some time, and believes the fund is well positioned to benefit from this.
5. Majedie UK Equity
Majedie’s co-founders James de Uphaugh and Chris Field, who also form part of the team managing the Majedie UK Equity fund, see an uncertain 2016 on the horizon for UK equities. With a ‘Brexit’ referendum forthcoming, they believe the market could once again be affected by political factors at a time when higher wages, challenges around inflation and uncertain monetary policy combine to pile pressure onto British consumer companies.
The fund offers investors exposure to well-known UK blue chips, with its top holdings including the likes of HSBC, BP and Vodafone.
6. Standard Life Global Absolute Return Strategies (GARS)
This mammoth £26.5 billion fund is an umbrella fund for 34 individual strategies that each seek to contribute positive returns across different market environments. The fund proved popular with investors over the course of 2015, and remains the market leading targeted absolute return fund despite spawning numerous imitations from competitors. The Standard Life Multi Asset Investing Team expects modest global growth for 2016, with the key driver of asset returns being an increased divergence in Central bank monetary policy between those such as the US Federal Reserve that are raising interest rates, and those (Europe and Japan) that continue to print money.
7. Threadneedle European Select
Europe is one of our preferred equity markets for 2016, a view shared by Columbia Threadneedle which points to signs of improvement in several European economies and an anticipation that domestic European earnings will contribute to overall corporate profitability. With European corporate balance sheets outside the financial sector strengthening, manager David Dudding will be on the lookout for new firms to include in his concentrated portfolio of high-quality growth companies.
8. M&G Feeder of Property Portfolio
This fund is diversified across a number of commercial properties including the New Square Bedfont Lakes office park at Heathrow (home of the UK head office of telecommunications giant Cisco Systems) and the Gracechurch shopping centre in Sutton Coldfield. M&G’s property team believe that while Central London office properties are currently showing evidence of rental growth, further growth is needed across sectors outside the south of the UK for strong performance in the property market to continue. The team at M&G like to use active asset management, such as refurbishing properties or gaining change of use, to attract higher quality tenants and improve rental growth.
9. Fundsmith Equity
The Fundsmith Equity fund, managed by City heavyweight Terry Smith, is a global equity fund that invests in quality businesses in the US, Europe and UK that can sustain high returns and have attributes that are difficult for their competitors to replicate. The fund had a very strong 2015, outperforming its benchmark, the MSCI World Index, by 10.8%. Strong performances from its holdings in December came from travel technology company Amadeus, Microsoft and US soft drink group Dr Pepper Snapple.
10. Invesco Perpetual Targeted Returns
A rival to the Standard Life Global Absolute Return Strategies (“GARS”), this upstart is managed by some of the former GARS team. In our view the Invesco Perpetual Targeted Returns is a worthy competitor and holds a coveted 5 star rating from the Tilney Bestinvest research team. Another fund house that believes Central bank policy has a key part to play in 2016, Invesco Perpetual pinpointed the US Federal Reserve’s rate hike as the defining moment of December.
At a glance: The most popular funds selected by clients using Tilney Bestinvest’s Online Investment Service in December 2015:
Find out more about how we rate funds here: /investment-research/our-research-approach