The Big Theme
Welcome to our Top 100 funds - our pick of the best actively managed unit trusts, Oeics and investment trusts available to UK investors. The IC Top 100 represents what we believe to be the best actively managed funds across all the major sectors and asset classes, so wherever you choose to invest you should find something of interest.
Please note that it doesn't include exchange traded funds, or any other passive fund - ie funds where you pay a fund manager to pick stocks and add value. See the introduction for more on how we chose the funds.
Aslo, be aware that we can offer no guarantees. Past performance is no guide to future performance. Back up our recommendations and ideas with your own research and take advice if you feel you need to. Make sure you understand the fund, its aims and the risks involved before you invest your money. Only you can decide whether a fund meets your objectives or not.
MONEY MARKET FUNDS (3 funds)
Money market funds use their bulk-buying power to get better rates of interest from bank deposit accounts. A cash investment tends to be seen as a far lower-risk, lower-return option than bonds or equities. It can be a useful tool for highly risk-averse investors, or as a temporary home for your money in between longer-term decisions. It is not aimed at those investors seeking long-term capital growth.
In late 2010, money market funds came under FSA scrutiny. The regulator was concerned that the name of these funds could be misleading. Many funds were labelled as cash funds yet were invested in esoteric, high-risk investments. When the downturn hit, their performance suffered, leaving those who had invested in these funds facing huge losses.
Here are three funds that we like - use them to de-risk if you want to come out of markets for a while. They do not make good returns relative to other fund sectors, but they are not meant to - their purpose is to preserve rather than grow your assets.
■ BlackRock Cash Fund is not a top performer in the Investment Management Association's (IMA) Money Market fund sector because its choice of investments is more conservative than some money market funds, but it has done a good job of protecting against losses. Read our fund profile from August 2011. Current data for the fund is here.
■ Fidelity Cash Fund is one of the largest and longest running money market funds. It offers a high level of security, but its low-risk approach means its yield is lower than some of its peers. Read our fund profile from June 2012. Current data for the fund is here.
■ Premier UK Money Market Fund posts good performance without taking excessive risks. The fund maintains a diverse exposure to high-quality financial institutions with strong credit metrics. Read our fund profile from August 2011. Current data for the fund is here.
BOND FUNDS (10 funds)
The part bond funds play in your portfolio depends on your financial objective. However, most investors should have a portion of capital allocated to corporate bonds - especially if income is your objective.
We think strategic bond funds are the best one-stop option for your bond exposure, as they have the ability to invest across the spectrum of bonds, both government and corporate, depending on market conditions. Strategic bond funds can also make use of derivatives such as swaps for protection and asset allocation, as well as extra hedging.
A downside to the broad investment mandate of the funds in the Sterling Strategic Bond sector is that they can be very different to each other in terms of underlying investments and risk, making it harder for investors to choose one.
Among strategic bond funds, we have three favourites:
■ Legal & General Dynamic Bond Trust is a bond fund for all seasons. Manager Richard Hodges has more than 21 years of fund management experience and draws on the expertise of Legal & General's fixed-income team of 48 analysts. Read our fund tip from June 2011. Current data for the fund is here.
■ Henderson Strategic Bond offers a high yield and has posted robust long-term total returns. It is managed by fixed-income veteran John Patullo, who is also Henderson's head of retail fixed income. Read our fund tip from June 2011 and fund profile from December 2009. Current data for the fund is here.
■ M&G Optimal Income is a fully flexible bond fund, allowing investment across a broad range of fixed-income assets according to where the fund manager, M&G's bond guru Richard Woolnough, identifies value. Mr Woolnough has a track record and consistency that few bond managers can match. Read our fund tip from March 2010, our fund profile from October 2011 and interview with Richard Woolnough from January 2012. Current data for the fund is here.
If you want to do your bond allocation yourself one option is to use passive ETFs to do the asset allocation. The advantage here is that this will be cheaper than using active funds, but the disadvantage is that ETFs may invest in corporate bonds in sectors that you may want to avoid, for example financials. You can use ETFs to access gilts in particular or buy gilts directly. In addition, here are some actively managed funds that can help you access different types of corporate bonds:
■ M&G Corporate Bond Fund is designed as a low-risk, plain vanilla UK corporate bond fund, with limited exposure to high-yield bonds, but has performed extremely strongly. It is managed by Richard Woolnough. Read our fund profile from June 2011 and our fund tip from January 2009, you can find both online easily, along with current data for the fund here.
■ M&G Strategic Bond - despite its name - has a fixed mandate to invest 80 per cent of the portfolio in UK corporate bonds. Up to 20 per cent of the portfolio may be invested in higher-yielding corporate bonds, government debt, convertibles and preference shares, as well as money market instruments. The fund’s exposure to corporate debt may be gained through the use of derivatives. The fund won Best Bond Fund at the IC FUND AWARDS IN 2012. Read our fund profile from April 2012. Current data for the fund is here.
■ New City High Yield Investment Trust aims to provide investors with a high gross dividend yield and the potential for capital growth by investing mainly in high-yielding fixed-interest securities. This was shortlisted for Best Bond Fund in our March 2012 Fund awards. Current data for the trust is here.
■ Kames High Yield Bond Fund aims for total return from high-yield bonds, not just income. It has a more aggressive investment approach than some other high-yield bond funds. Read our fund tip from December 2010 when it was called Aegon High Yield bond. Current data for the fund is here.
Investors seeking to mitigate the effects of inflation could consider:
■ M&G UK Inflation-Linked Corporate Bond Fund, which invests in a spread of fixed-interest securities that should perform well when inflation is high or rising. Read our fund profile from March 2012. Current data for the fund is here.
For those who need monthly income, we like:
Use exposure to overseas bonds to diversify your portfolio. In this area we like:
■ M&G International Sovereign Bond, which invests primarily in investment-grade sovereign debt securities denominated in the currencies of the major industrialised nations, with the exception of the UK. The fund aims to maximise total return (the combination of income and growth of capital) and was shortlisted for Best Bond Fund at our IC FUND AWARDS IN 2012. Current data for the fund is here.
WEALTH PRESERVATION (5 funds)
For most investors, preserving their hard-earned assets is a priority. Many funds with 'cautious' in their name have lost investors money in recent years so you have to tread carefully in this space. Many so-called absolute-return funds have not lived up to their names, either. So, if you want to preserve your capital, here are five funds that will help:
■ RIT Capital Partners is an investment trust that invests globally across a wide range of assets to prioritise preserving investors' capital over profit maximisations. Read our fund tip from January 2009, our tip update from December 2011 and fund profile from December 2010. Current data for the trust is here.
■ Personal Assets Trust is an investment trust that has been very successful at limiting the downside. Its cautious approach means performance can lag when markets are rising, but long-term performance is very strong. Read our fund tip from August 2009, fund profile and interview with fund manager Sebastian Lyon. Current data for the trust is here.
■ Newton Real Return is one of the few absolute-return funds that have delivered on their goals. It delivered positive returns even during the financial crisis in 2008. Read our fund tip from 27 March 2012, our fund profile from 2011 and interview with fund manager Iain Stewart. Current data for the trust is here.
■ Ruffer Investment Company looks to generate annual absolute returns after all expenses of more than twice the Bank of England's base rate. In 2008 it made an impressive 24.2 per cent as the FTSE All-Share fell nearly 33 per cent. Read our fund tip from May 2010, and our fund profile from December 2010. Current data for the trust is here.
■ Invesco Perpetual Distribution aims to achieve a balance of income and capital growth through a portfolio of primarily UK equity and fixed-interest securities. It is cautiously managed, employing the talents of Invesco Perpetual's fixed-interest team, comprising Paul Causer and Paul Read, together with Neil Woodford covering UK equities. Read our fund profile from October 2012. Current data for the fund is here.
UK EQUITY INCOME (9 funds)
Dividends are very important for equity investors seeking income. But for growth investors they can also be reinvested to boost growth over time, so UK equity income funds can be used as core holdings. These are the funds we like:
■ Trojan Income fund is the winner of the Best UK Equity Income fund category in the Investors Chronicle Fund Awards 2012. It has outstanding long-term performance plus a focus on not losing money. Read our fund profile from 5 March 2012 and our fund tips for 2012 (of which it was one) and our interview with fund manager Francis Brooke. Current data for the fund is here.
■ Schroder Income Maximiser lives up to its name by following a two-pronged approach. Since its launch in November 2005, it has managed to successfully exceed its 7 per cent a year yield target each year. Read our fund profile from February 2011 and fund tip from March 2009. Current data for the fund is here.
■ Perpetual Income and Growth investment trust is a dividend hero for income investors. It aims to provide shareholders with capital growth and real growth in dividends over the medium to longer term from a portfolio of securities listed mainly in the UK equity and fixed-interest markets. It is managed by Mark Barnett, a senior member of Invesco Perpetual's UK team based in Henley. Read our fund tip from January 2012 . Read our June 2012 interview with Mark Barnett. Current data for the trust is here.
■ Artemis Income Fund aims to achieve a rising income combined with capital growth from a portfolio primarily made up of investments in the UK. It is managed defensively by Adrian Frost and is a solid choice for income seekers. Read our fund profile from May 2011 and fund tip from February 2009. Current data for the fund is here.
■ Unicorn UK Income has delivered strong returns by targeting smaller companies that make their money overseas. It was shortlisted in the Best UK Equity Income Fund category of the IC FUND AWARDS IN 2012. Read our fund tip from April 2012 and fund profile from October 2010. Current data for the fund is here.
■ Murray Income Trust is an investment trust that aims to achieve a high and growing income, combined with capital growth through investment in a portfolio principally of UK equities. It is a long-running holding in our investment trust columnist John Baron's investment trust portfolios. Read our interview with the trust's manager, Charles Luke. Current data for the trust is here.
■ City of London Investment Trust aims for long-term growth in income and capital from a broad spread of large blue-chip and medium-sized UK-listed companies and has scope to invest in overseas stocks. It is managed conservatively and is noted for having the longest record of raising its dividends among all investment trusts. Despite concerns that it is too 'index-like' it is good for those wanting predictability of income and returns. Read The real dividend heroes. Current data for the trust is here.
■ Mercantile Investment Trust offers a way of securing UK-derived income away from both blue-chips and bonds. The trust aims to provide income and capital growth though opportunities in UK mid-cap and small-cap stocks. It invests in a diverse portfolio and has a decent dividend. Read our fund tip. Current data for the trust is here.
■ Acorn Income Fund, a closed-ended investment company that seeks income from a portfolio of UK small caps and fixed-interest investments, proves you can get income from smaller companies, too. Read our fund tip from July 2011. Current data for the fund is here.
OVERSEAS EQUITY INCOME (5 funds)
It is a good idea to diversify your income streams. For example, income investors should not limit themselves to the UK only. Income can come from overseas, too, particularly from Asia. These are the funds that we think offer the best options for overseas income.
■ Aberdeen Asian Income Fund is an investment trust with brilliant performance but often trades at a premium to the underlying net asset value. Read our fund profile from June 2011 and interview with Hugh Young who heads up the Asian equities team at Aberdeen. Current data for the trust is here.
■ Newton Asian Income offers income and growth from Asia Pacific non-Japanese equities. It is one of the few open-ended, income-focused funds investing in the Asia Pacific ex-Japan region with a track record of more than five years. Read our fund tip from June 2011. Current data for the fund is here.
■ JPMorgan US Equity Income aims for long-term capital growth as well as income from the world's largest economy. The fund is managed by Clare Hart and Jonathan Simon out of New York. Read our fund profile from December 2011. Current data for the fund is here.
■ M&G Global Dividend does not chase the highest dividend of the day, but focuses on total return from companies around the world. Fund manager Stuart Rhodes chooses companies on their merits rather than by sector or geography. Read our fund tip from September 2011, our fund profile from August 2010 and our interview with Stuart Rhodes. Current data for the fund is here.
■ Invesco Perpetual Global Equity Income does not offer the highest yield in its sector, but its managers, Paul Boyne and Doug McGraw, prefer companies with growing and sustainable dividends, rather than simply the highest yielding shares. Read our fund tip from June 2012. Current data for the fund is here.
UK GROWTH (7 funds)
Many investors choose to stick with what they know best. Here are some funds that are working hard to boost their investors' capital by investing in UK companies.
■ Edinburgh Investment Trust is a good core holding, cautiously managed by Invesco Perpetual's Neil Woodford. It invests primarily in UK companies with the long-term objective of achieving capital growth of more than the FTSE All-Share index; and growth in dividends per share of more than the rate of UK inflation. Read our fund tip from November 2008. Current data for the fund is here.
■ Finsbury Growth & Income Trust favours undervalued companies with strong brands or powerful market franchises, looking for attributes such as the ability to prosper through business cycles for many years; grow earnings every year; and generate earnings growth without making heavy balance sheet investment. Fund manager Nick Train holds shares for the long term regardless of short-term volatility, aiming for them to double or more in value over time. This results in extremely low portfolio turnover, which saves on transaction costs and has contributed to excellent performance. Read our fund profile from May 2012 and our interview with Nick Train from February 2012 plus our interview with him from August 2011. Current data for the fund is here.
■ Liontrust Special Situations was shortlisted for the best UK Equity Growth Fund category in the IC FUND AWARDS. It invests in a portfolio of stocks from throughout the FTSE All-Share and smaller company indices. All holdings have distinctive, intangible strengths that competitors struggle to reproduce. Read our interview with co-fund manager Julian Fosh. Current data for the fund is here.
■ Marlborough UK Micro-Cap Growth fund invests on a total return basis in UK smaller companies with a market capitalisation of £100m or less. A considerable proportion of the portfolio is invested in smaller companies with a market capitalisation of less than £50m. Managed by Giles Hargreave, the fund was shortlisted in the Best UK Equity Growth Fund category at the IC FUND AWARDS 2012. Read our fund tip from May 2012. Current data for the fund is here.
■ M&G Recovery is a giant fund with excellent performance that invests in unloved companies and sticks with them as they improve. Read our interview with its manager Tom Dobell and our fund tip from February 2010. Current data for the fund is here.
■ Standard Life UK Smaller Companies Trust is managed by Harry Nimmo, one of the best small company fund managers. Read our fund tip from May 2009 and interview with Harry Nimmo. Current data for the trust is here.
■ BlackRock Smaller Companies Investment Trust is a cheaper alternative to the Standard Life trust. The trust aims to achieve long-term capital growth for shareholders through investment mainly in smaller UK quoted companies. Our investment trust columnist, John Baron, upped his holding in this trust in March 2012 because he likes its manager, Mike Prentis. Read our fund tip from September 2010 and our fund profile from July 2010. Current data for the trust is here.
GLOBAL GROWTH (9 funds)
A good global growth fund can be a core holding for your portfolio. Global funds have the greatest potential for growth as they can find opportunities in all parts of the world. Here are our nine favourites:
■ British Empire Securities and General has been one of our favourite investment trusts for many years and was our investment trust tip for 2011. The trust's manager - John Pennink since 2002 - has a clear focus to invest in undervalued assets on a global basis. He favours companies with little or no debt and relatively low volatility in their share price, as well as tangible fundamental value. Current data for the trust is here.
■ M&G Global Basics Fund focuses on companies in basic industries and sectors such as utilities, energy, raw materials, industrials, consumer basics and commodities, as well as the companies that service these areas. Together, these companies are regarded as the 'building blocks of the global economy' because their products and services are rarely out of demand. The root of the fund's investment strategy is to identify structural changes in economies or shifts in consumption patterns around the world. Read our fund tip from July 2009. Current data for the fund is here.
■ Murray International investment trust won Best Global Income Fund at Investors Chronicle's Fund Awards 2012 but it actually has a joint goal of achieving income and capital growth through investments predominantly in worldwide equities. In our November 2011 fund tip we said this trust was worth buying even at a premium to its underlying net asset value. The views of fund manager Bruce Stout have proved "prophetic" and have been a key driver of its performance. Current data for the trust is here.
■ Lindsell Train Investment Trust has a global mandate but runs a concentrated equity portfolio of between eight and 25 holdings. It also holds a 25 per cent stake in its parent fund management company, Lindsell Train. The manager, Nick Train, likes investing in well-known brands. Current data for the trust is here.
■ F&C Global Smaller Companies is the only investment trust to specialise in smaller company investment on a global basis and has a focus on identifying undervalued companies with strong growth potential. Pitted against other global growth funds that have the ability to invest in all sizes of companies it won the hotly contested Best Global Growth Fund category at IC FUND AWARDS 2012. Current data for the trust is here.
■ Cazenove Multi-Manager Diversity is a fund of funds that aims to provide inflation protection and limit the downside. It invests for long-term capital growth across a broad range of asset classes and fund managers. The fund seeks to outperform the Consumer Prices Index benchmark by 4 per cent a year over the medium term. Read our fund profile from February 2011 and interview with the fund's co-manager, Marcus Brookes. Current data for the fund is here.
■ Scottish Mortgage Investment Trust is a high-conviction global portfolio targeted at growth stocks. It is also one of the lowest cost global growth investment trusts. Read our fund tip from May 2010 and interview with deputy fund manager Tom Slater. Current data for the trust is here.
■ Unicorn Mastertrust is an open-ended fund that invests for growth in a globally diversified portfolio of investment trusts - a good introduction to investing in the investment trust sector. Read our interview with the fund's manager, Peter Walls, here. Current data for the trust is here.
■ F&C Managed Portfolio Growth Trust is an investment trust that invests in a globally diversified portfolio of investment trusts, again a good introduction to investing in the investment trust sector. Current data for the trust is here.
US (4 funds)
Your portfolio needs significant exposure to the world's largest economy, the US. This can be tricky, though, as most active managers struggle to outperform the US market, meaning an ETF or index tracker fund may be the best way to get exposure. Here we like:
■ SPDR S&P 500 ETF tracks the S&P 500 index and has a very competitive total expense ratio (TER) of just 15 basis points a year. This is a significant saving over the ETF's main competitor, the iShares S&P 500 Index Fund, which charges 40 basis points per year and won the Best Exchange-Traded Product for US Exposure category at the IC FUND AWARDS IN 2012. Like the iShares ETF, the SPDR ETF buys all the underlying shares in the S&P 500 in the correct weightings to mirror the movement of the actual index. However, from time to time the fund may also have limited exposure to derivatives and mutual funds. Read our fund tip from April 2012. Current data for the SPDR S&P 500 ETF is here.
In the active space, there are three funds that have a good record of consistently beating their respective benchmarks. Each offers access to a different area of the US market:
■ JPMorgan American Investment Trust is one of the few actively managed funds to consistently beat the market. The trust aims for capital growth and seeks to outperform the S&P 500 principally using stock selection. The selection process has a particular focus on sustainable earnings growth, strong cash flows and reasonable valuations. Performance is further boosted by the fund's exceptionally low charges. Read our fund tip from June 2011. Current data for the trust is here.
■ Axa Framlington American Growth fund aims for capital growth by investing mainly in US, as well as Canadian and Mexican, large- and medium-cap companies. The fund has beaten its comparative benchmark, Russell 1000 Growth, by significant margins over one, three and five years. Read our fund tip from June 2012. Current data for the fund is here.
■ F&C US Smaller Companies investment trust invests in medium and small companies. The trust's manager, Robert Siddles, is conservative in his stock selection, targeting companies that have a strong franchise, free cash flow and management that holds a stake in the business. Read our fund profile from November 2010 and our interview with the fund's manager, Robert Siddles. Current data for the fund is here..
JAPAN (3 funds)
Japan has been the world's most disappointing major stock market but, as it is a major economy, a balanced portfolio would still have some exposure. We like three funds:
■ GLG Japan Core Alpha is a sound choice for getting core Japan exposure into your portfolio. It boasts a sturdy and proven process and an accomplished management team. Although it has temporarily soft-closed to new investment, starting on 31 March 2012, it is still available via brokers such as Hargreaves Lansdown and Bestinvest. You may think the soft-closure raises the risk of investing too high for your taste - if so, either wait for the soft-closure to be lifted or consider one of the investment trust options below. Read our fund profile from April 2011 and our fund tip from March 2010. Current data for the fund is here.
■ Baillie Gifford Japan investment trust has both a good reputation and a good track record. It also holds a reasonable amount of mid-market and smaller stocks, so its portfolio is focused on growth. Read our fund tip from November 2010 and fund tip update from March 2011. Current data for the trust is here.
■ Schroder Japan Growth investment trust invests in Japanese companies with a proven track record and solid profits growth prospects that are not fully reflected in the share price. The trust's holdings include smaller companies that can add volatility to returns. Read our fund profile from April 2012. Current data for the trust is here.
EUROPE (2 funds)
Despite debt problems and the threat of a Greek exit there are still some good opportunities over on the continent. These are the two funds that we think are best positioned to benefit:
■ Fidelity European Values aims to achieve long-term capital growth from the Continental European stock market. It has benefited from a change in manager - Sam Morse took over the portfolio management in January 2011 and subsequently slimmed down the portfolio. Read our fund tip from August 2011. Current data for the trust is here.
■ Jupiter European Opportunities investment trust is a good way to access smaller companies. Fund manager Alex Darwall describes himself as a "pan-European investor". He takes a very bottom-up approach to stock selection, focusing on the company rather than the country it is domiciled in or - for that matter - the market it is listed on. Read our fund profile from April 2010 and interview with fund manager Alex Darwall. Current data for the trust is here.
ASIA (3 funds)
Asia is a region full of opportunity. The arguments for investing in Asian equities remain compelling. India boasts an emerging middle class; China is the engine for global recovery; while more mature economies such as Singapore and Korea offer well-established companies with large exposure to the budding markets of Indonesia, Vietnam and Thailand. Many funds invest across Asia while excluding investment in Japan. We like:
■ Aberdeen Asian Smaller Companies Investment Trust has a successful fund manager in Hugh Young, good performance and a proven investment process. Read our fund tip from July 2010. Current data for the trust is here.
■ First State Asia Pacific Leaders fund follows a bottom-up process to seek out good quality companies across the region. Read our fund profile from July 2009 and interview with fund manager Alistair Thompson. Current data for the fund is here.
■ Edinburgh Dragon Trust is one of the UK's largest investment trusts and has a strong performance record. It aims for long-term capital growth through investments in the Far East excluding Japan & Australasia. Read our fund profile from October 2009. Current data for the trust is here.
EMERGING MARKETS (8 funds)
Many UK investors have been increasing their exposure to emerging markets in the light of problems in the eurozone. Certainly, if you look away from Europe, the world has plenty of thriving, fast-growing markets. However, emerging markets are high risk, being traditionally the hardest hit when there is a wider market sell-off. Your first move into emerging markets should be via a highly diversified generalist fund such as these:
■ Templeton Emerging Markets Investment Trust is managed by emerging markets veteran Dr Mark Mobius, one of the pioneers of emerging markets investing, and has posted stellar performance for investors. The trust seeks long-term capital appreciation though investment in companies operating in emerging markets or stocks listed in stock markets of such countries. Read our fund profile from January 2011, fund tip from March 2011 and interview with Mark Mobius on new frontiers in investment. Current data for the trust is here.
■ First State Global Emerging Markets Leaders is one of the best of its type, investing with a focus on quality emerging markets companies. The high calibre of the management team makes this fund stand out, as does its performance record. It won Best Global Emerging Markets fund at our FUND AWARDS IN 2012. Read our fund tip from April 2009 and interview with fund manager, Jonathan Asante. Current data for the fund is here.
■ Utilico Emerging Markets invests predominantly in infrastructure, utility and related sectors, mainly in emerging markets. It was shortlisted for Best Emerging Markets Fund in our FUND AWARDS IN 2012. Read our fund tip from July 2010 and our fund profile from November 2011. Current data for the fund is here.
■ Advance Developing Markets Fund is an investment trust that invests in other emerging markets investment trusts - so it is very highly diversified. Concentrating on asset allocation and outsourcing stock picking has produced tremendous returns. Read our fund profile from August 2011 and interview with fund manager Slim Feriani. Current data for the trust is here.
■ JPMorgan Global Emerging Markets Income Trust is an investment trust that offers access to dividend-paying stocks in the MSCI Emerging Markets Index. Read Fund tips for income and The emerging bond opportunity. Current data for the fund is here.
There are also plenty of funds that specialise in particular economies in the emerging markets area. Use these if you have strong views on investment prospects in the respective countries or as satellite funds to complement a generalist emerging markets fund. We like:
■ Neptune Russia And Greater Russia is volatile but a good option for investors prepared to take on the risks. Read our fund profile from November 2011. and Eight funds for your Isa from March 2011. Current data for the fund is here.
■ Eastern European Trust gives access to the emerging markets next door. The investment trust aims to achieve long-term capital growth by investing in companies that do business primarily in eastern Europe, Russia, other Commonwealth of Independent States countries and Turkey. Read our fund tip from August 2011. Current data for the fund is here.
FRONTIER MARKETS (3 funds)
Funds investing in frontier markets are ultra high-risk investments and not for the faint-hearted. However, they could reap big rewards for investors with long timescales.
■ Fidelity Emerging Europe Middle East and Africa fund takes a broader approach than specialist Africa funds. It aims to generate long-term capital growth by investing in the less developed countries of central, eastern and southern Europe, the Middle East and Africa. Read our fund profile from June 2011 and our fund profile from November 2012. Current data for the fund is here.
■ Investec Africa Opportunities Fund aims to capture the strong growth prospects of the rapidly developing continent of Africa through a portfolio of about 30 highly liquid equities. While the fund can invest in the more established South African market, it will also target markets such as Nigeria and Egypt to capture what it views as the African growth story. Investec is one of the more experienced players in frontier markets, offering a number of funds focused on this area. Read our Funds venturing into Africa. Current data for the fund is here.
■ BlackRock Frontiers Investment Trust invests in a representative number of the MSCI Frontiers Index markets, meaning it has exposure to a wider range of frontier markets than the Investec fund. Read Get 5 per cent a year in frontier markets. Current data for the trust is here.
COMMODITIES (7 funds)
Commodities are a very high-risk and volatile investment area, but commodity funds can help to lower that risk through a diversified portfolio of stocks, meaning there is the potential for big returns and asset diversification for your portfolio. It is probably best to start with a good generalist fund such as one of these three:
■ First State Global Resources Fund aims to achieve long-term capital growth by investing in equities in the natural resources and energy sectors worldwide. The fund has a defensive bent with a limited exposure to small companies. Read our fund tip from July 2009 and interview with fund manager Joanne Warner. Current data for the fund is here.
■ City Natural Resources High Yield investment trust aims for capital growth and income from mining and resource equities and bonds issues by industrial and extractive companies. With its focus on gold miners and low costs, it has performed very well for investors. The trust won Best Commodity Fund at the IC FUND AWARDS IN 2012. Read our interview with fund manager Will Smith, fund profile from November 2010 and fund tip from March 2009. Current data for the trust is here.
■ BlackRock World Mining Trust is an investment trust that aims to maximise total real returns to shareholders through a worldwide portfolio of mining and metal securities. Up to 10 per cent of the assets may be invested in physical metals. Read our fund profile from July 2010 . Also read how it stacks up against its mirror open-ended fund. Current data for the trust is here.
There are plenty of funds that specialise in gold mining companies. The following three were all shortlisted for Best Commodity Fund at the IC FUND AWARDS IN 2012:
■ BlackRock Gold & General invests in gold mining and other precious-metal-related shares and is a popular way to buy into the gold story. Read BlackRock Gold & General most popular Isa fund and interview with fund manager Evy Hambro. Current data for the fund is here.
■ Smith & Williamson Global Gold and Resources is small and nimble and has built up an impressive performance record. It offers investor participation, through a carefully selected portfolio of companies, in both the movement in the bullion price - the fund has up to 10 per cent exposure to gold bullion through ETFs and closed-end funds - and also the potentially strong growth of gold mining shares. Read our fund tip from August 2011. Current data for the fund is here.
■ Investec Global Gold fund invests primarily in equities issued by companies around the globe involved in gold mining. The fund may also invest up to one-third in companies around the globe that are involved in mining for other precious metals and minerals. Current data for the fund is here.
However, commodities are not just about gold and mining resources. Diversify your exposure into 'soft' commodities such as agriculture.
■ Sarasin Agrisar Fund aims to achieve capital appreciation through thematic investment in the longer-term trends within the global food and agricultural industry. Read our fund tip from February 2010 - it was our best-performing fund tip for the calendar year 2010. Also read our fund profile from May 2011. Current data for the fund is here.
PROPERTY (6 funds)
Property is a good diversifier away from equities. But if you want real diversification then you need to invest in funds that invest directly in bricks and mortar.
■ M&G Property Portfolio is an open-ended property fund that invests in bricks-and-mortar rather than property shares and so provides better diversification when held alongside equities. Read our fund tip from November 2010 and our fund profile from November 2009 Current data for the fund is here.
■ UK Commercial Property won Best Property Fund at our FUND AWARDS IN 2012 due to its high income, reasonable costs and good fund manager commentary. The investment trust aims to provide shareholders with an attractive dividend yield and the potential for capital and income growth through investment in a diversified portfolio of UK commercial property. Read our fund profile from January 2012. Current data for the fund is here.
■ F&C Commercial Property Trust is an investment trust that invests in a diversified portfolio of UK commercial property - office, retail and industrial. It offers a good income and has a resilient portfolio but is often on a premium. It was shortlisted for Best Property Fund at our FUND AWARDS IN 2012. Read our fund profile from May 2012 and our interview with fund manager Richard Kirby. Current data for the fund is here.
■ Picton Property Income has a high dividend yield on a diversified portfolio of commercial properties and is at the riskier end of the property fund spectrum. Read our fund tip from February 2012 and our fund tip from July 2011. Current data for the fund is here.
■ ISIS Property Trust aims to provide shareholders with an attractive level of income together with the potential for income and capital growth from investing in a diversified UK commercial property portfolio. The trust was shortlisted at our FUND AWARDS IN 2012. It is managed by F&C Asset Management, the same company that runs the highly successful F&C Commercial Property Trust. Read our fund profile from January 2011. Current data for the fund is here.
■ First State Global Property Securities is invested in a global portfolio of property shares rather than bricks and mortar and was shortlisted for Best Property Fund at our FUND AWARDS IN 2012. Read our fund profile from September 2010. Current data for the fund is here.
SPECIALIST/ALTERNATIVE ASSETS (12 funds)
You might want to invest thematically or into areas that offer your portfolio diversification. Here are some funds that can do that.
Good specialists include:
■ BlackRock New Energy Investment Trust is diversified across a wide variety of international energy companies in different sectors. Read our fund profile from February 2010. and our fund profile from June 2009 Current data for the trust is here.
■ Jupiter Financial Opportunities fund aims to seek out growth opportunities in financials on a global basis, with a UK bias. The fund managed to post positive returns even when the financial sector was in big trouble. Read our interview with fund manager Guy de Blonay along with our fund profile from September 2011 and fund tip from July 2009. Current data for the fund is here.
■ Worldwide Healthcare Trust seeks superior healthcare investment opportunities on a worldwide basis by investing in pharmaceutical, biotechnology and related companies with a focus on capital growth, rather than income. Read our fund profile from July 2011 and why our investment trust columnist bought into the trust in April 2012. Current data for the trust is here.
■ International Biotechnology Trust offers investors a route into the new biotechnology-derived drugs and technologies emerging. Managed by SV Life Sciences (SVLS), the fund is focused on development-stage quoted or unquoted biotechnology companies with the potential for high growth. Read our fund tip from October 2011. Current data for the trust is here.
■ Polar Capital Technology Trust aims to maximise long-term capital growth via technology company shares from areas including information, media, communications, environmental, healthcare and renewable energy, and computing and associated industries. Read our fund profile from February 2010. and our fund tip from July 2009. Current data for the trust is here
■ GLG Technology Equity Retail Fund is managed by Philip Pearson and Anthony Burton, who adopt an absolute-return mentality when seeking out companies in the tech, media and telecommunications space offering capital growth. The fund has a more diverse geographic allocation than its peers, being less focused on the US. Read our fund tip from May 2012 and our fund profile from February 2010. Current data for the fund is here.
Good diversifiers include:
■ First State Global Listed Infrastructure is a solid globally diversified defensive play on infrastructure and proved itself during the worst of the financial crisis. Read our fund profile from July 2010 and fund tip from July 2011. Current data for the fund is here.
■ 3i Infrastructure is an investment company that invests in infrastructure businesses and assets. It is building a diversified portfolio of infrastructure investments across the globe, with a focus on Europe and India. The appeal for investors is high-yield inflation protection. Read our fund tip from May 2011. Current data for the fund is here.
■ Standard Life European Private Equity Trust will help diversify you portfolio at low cost. Private equity is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange. The investment trust aims to achieve long-term capital gains through holding a diversified portfolio of private equity funds investing predominantly in Europe. Read our fund tip from July 2011 and fund profile from June 2011. Current data for the fund is here.
■ BH Macro investment trust makes very different returns to equities by investing all of its assets into the Brevan Howard Master hedge fund, one of the largest hedge funds globally. This hedge fund aims to generate long-term appreciation through active leveraged trading and its exposure is mainly to global fixed income and foreign exchange markets. Read our fund profile from January 20122. Current data for the fund is here.
■ CatCo Reinsurance Opportunities Fund is an esoteric, insurance-based investment trust, offering strong returns that are uncorrelated to other markets, particularly equities. The trust makes its money by providing a backstop to the insurance industry. In exchange for a fee, or premium as it is called in industry speak, CatCo promises insurers it will make up the difference if claims relating to certain types of natural catastrophe exceed a given level in a year. The fund targets returns of Libor plus 12-15 per cent including a yield of Libor plus 5 per cent based on year-end net asset value (NAV). Read our fund tip from October 2011 and our feature on esoteric investment trusts from September 2011. Current data for the fund is here.
ETHICAL/ENVIRONMENTAL (4 funds)
More and more investors are interested in aligning their ethics and social conscience with their investments. There is a broad spectrum of funds in the ethical and environmental field - to cater for different principles. Here are four that we think are worth considering.
■ Rathbone Ethical Bond aims to provide a regular, above-average income through investing in a range of bonds and bond market instruments that meet strict criteria ethically and financially. It is an attractive investment for those socially responsible income-seekers who want limited risk. Read our fund tip from October 2010 and our fund profile from October 2011. Current data for the fund is here.
■ CIS Sustainable Leaders Trust aims to provide capital growth from a diverse portfolio of equities, mainly in the United Kingdom and in any economic sector. Investment is limited to companies that are likely to benefit from measures to improve the environment, human health, safety and the quality of life. In addition, investment may be made in companies considered to be beneficiaries of changing attitudes towards a cleaner and safer environment, including those seen to be making above-average efforts to minimise environmental damage caused by their activities. Areas of avoidance constitute animal testing (unless conducted for the benefit of human health), countries where human rights are disregarded, items with military applications, tobacco and nuclear power. Read our fund tip from November 2009 and fund profile. Current data for the fund is here.
■ Impax Environmental Markets Trust focuses on cleaner and more efficient delivery of energy, water and waste. It invests globally, mainly in listed companies involved with technology-based systems, products or services in environmental markets. Read our fund tip from April 2011 and our fund profile from October 2011. Current data for the fund is here.
■ New Earth Solutions Recycling Facilities Inv Sub Fund invests in UK recycling facilities. Its relatively high costs, inflexibility and high minimum investment levels mean this fund won't be suitable for all investors. But if you're looking to introduce a small element of diversification into a predominantly equity-focused portfolio, it offers index-linked revenues in a growing industry, and has so far generated good returns. Read our fund tip from November 2011. Current data for the fund is here.
You can read our previous Top 100 selection from August 2011 here.
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