Every saver wants the best investment funds in their portfolio. The trouble is, once a fund has become well-known after a good spell of performance, it is statistically more likely to underperform.
Investing in the funds at the top of their sector rankings is not always the best idea – some experts describe this as “backing yesterday’s winners”.
This is why fund selectors devote so much time to trying to find hidden gems. These are fund managers with a great investment strategy, but who aren’t widely known.
We ask the experts for their pick of the best up and coming funds to add to your portfolio.
UK: ARDEVORA UK INCOME
This fund is run by an experienced duo, Jeremy Lang and William Pattison, who set up their own investment boutique after long careers at the biggest fund houses. It has made 72 per cent since inception in 2011.
The pair draw on behavioural psychology to find the companies that will outperform the wider UK market – and provide a good level of dividend income too.
Fund expert Jason Hollands of Tilney Bestinvest highlights this fund as one which has made a name for itself among professional investors. “This fund has yet to be discovered by savers but has developed a very strong record since launch,” he explains.
“One interesting aspect of this approach is that the fund managers don’t meet company management teams – something most of their rivals claim is key to their processes – in the belief that this would just introduce a source of bias. Instead Ardevora drills into the balance sheets and cashflow statements of companies, and looks at the language businesses use to update the market.”
“The resulting portfolio is very different to the benchmark index and typically has much greater exposure to mid-caps than other income funds, but is also inherently aware of risk,” Hollands adds.
UK: R&M UK SMALLER COMPANIES
This fund has a new manager, Philip Rodrigs, who took over a year ago and his fresh approach is garnering interest from expert fund pickers.
“Rodrigs uses statistical analysis to filter his stocks,” says Adrian Lowcock of Axa Wealth. “He also analyses company balance sheets and income statements to ensure that a company’s outlook is sustainable.”
ASIA: BLACKROCK ASIAN GROWTH LEADERS
The managers of this fund try to find the best investment opportunities from across Asia, although they don’t invest in Japan.
At the moment, it is focused on China, Korea, Taiwan, Thailand and the Philippines. It only launched in 2012 so does not have a long track record, although it has a lot of potential, says Tom Becket of Psigma Investment Management. It often invests in medium-sized companies which have greater potential for growth, rather than the well-established giants which have less potential to rise on the stock market.
“This fund is a very interesting play on mid-cap Asian companies. The fund manager has a fantastic record of being able to exploit investment opportunities,” Becket explains.
GLOBAL: BAILLIE GIFFORD GLOBAL DISCOVERY
This fund scours the world looking for the best smaller companies, and has made an impressive 97 per cent since its launch in 2011.
“This is a great little fund that is often missed by investors,” says Darius McDermott of FundCalibre. “The fund consists of the companies they think are the most innovative and fast growing in the world. It has a strong growth bias and is aggressive in nature. With a small cap remit, it is not for the faint-hearted of investors and can be volatile, but it’s an exciting fund looking for companies benefitting from structural change, disruptive technology and big innovators.”
SOCIALLY RESPONSIBLE: SLI UK ETHICAL
This fund has an ethical focus but has good performance even when compared with standard “go anywhere” investment funds. It also has an attractive yield of 3 per cent – good for income seekers.
“It takes a ‘no compromise’ approach to ethical screening,” says McDermott. “They regularly survey investors to make sure they are reflecting the views of their clients within this portfolio. It gives it something different to most other ethical funds.”