Best Isa funds for 2013

GROWTH

19. Jason Hollands, managing director, Bestinvest:

First State Global Emerging Market Leaders (GB0033873919):

"Emerging markets offer investors the opportunity to tap into much higher growth rates than the developed world, underpinned by younger populations and rising affluence. Yet over the past two years as western investors became risk averse due to concerns over the future of the euro and the US fiscal cliff, they reduced exposure to higher-risk markets, which has resulted in emerging markets reaching some of their lowest valuations in a decade. This represents a buying opportunity, and a good way to do this is via First State Global Emerging Market Leaders."

This fund is also an IC Top 100 Fund for reasons including strong performance, focus on quality companies and high calibre of the management team. It won Best Global Emerging Markets fund at our 2012 Fund Awards.

20. Adrian Lowcock, senior investment manager, Hargreaves Lansdown:

Liontrust Special Situations (GB00B0N6YF70):

"Anthony Cross and Julian Fosh, managers of Liontrust Special Situations, believe that in a modern service-based economy the value of a business often depends on its intellectual capital, ie the collective knowledge and experience of individuals within the organisation. This intellectual capital can give a company an economic advantage: distinctive competitive strengths that others will struggle to replicate. They look for companies which combine this with a dominant or secure market position in the UK, or exposure to faster-growing international markets, as companies with these qualities have the potential to grow faster than their peers."

INCOME

21. Jason Hollands, Bestinvest:

Fidelity MoneyBuilder Dividend (GB0003860904):

"UK equities provide access to many world class businesses. Companies have been distributing healthy dividends which are generally well covered by underlying earnings, and pay out ratios are still some way below their peak levels. This suggests there is still headroom for further increases. Historically around half of the overall return from the UK equity market has come from dividends, so equity income funds hold appeal for both income seekers and growth investors who are happy to reinvest their dividends and benefit from a compounding effect. There are a number of equity income managers we rate highly, but for those investors wanting a blue-chip approach, our favoured fund is Fidelity MoneyBuilder Dividend which, under Michael Clark, has been one of the least volatile funds in the sector."

22. Robert Pemberton, investment director, HFM Columbus:

Lazard Global Equity Income fund (GB00B24DPY79):

"The fund delivers a yield of around 4.6 per cent as well as offering both geographic and currency diversification for investors who may already hold the UK equity income behemoths from Invesco, Artemis, Jupiter and Threadneedle," says Mr Pemberton. "Lazard Global Equity Income has a very low UK weighting of less than 5 per cent with nearly 30 per cent in each of the US and Europe, as well as a 25 per cent allocation to emerging markets. It has a heavy weighting in financials, as well as significant exposure to consumer discretionary and industrial companies, but a low exposure to healthcare and consumer staples, which gives a more growth orientated aspect than a traditional equity income fund."

WEALTH PRESERVATION

23. Darius McDermott, managing director, Chelsea Financial Services:

CF Miton Special Situations Portfolio (GB00B031C923):

"This is a multi-asset fund with a focus on global asset allocation. The fund can hold any combination of cash, equities, fixed interest, commodities, property and alternative strategies, depending on the manager's view of the macroeconomic environment and which asset class he believes will perform best at any given time. The manager, Martin Gray, aims to match returns in rising markets while minimising the losses. Miton Special Situations could be suitable for investors who believe asset allocation is more important than fund selection and who don’t want to lose too much money at any point."

24. Robert Pemberton, investment director, HFM Columbus Asset Management:

CF Ruffer Total Return (GB0009684878):

"This is a conservative multi-asset fund with a strong capital preservation mindset, but still able to participate in rising markets. CF Ruffer Total Return has produced a positive return every year since launch in 2000, including in 2008 when it returned more than 20 per cent, despite the crash in equity markets. The current allocation includes 27 per cent in index-linked bonds, 20 per cent in Japanese equities, 13 per cent in North America and 12 per cent in UK equities, and 9 per cent in gold. The fund is diversified, and the Japanese position is an example of Ruffer's strategy of taking large and decisive contrarian bets where it sees value."

DIVERSIFICATION

25. Darius McDermott, Chelsea Financial Services:

Newton Global Higher Income (GB00B0MY6T00):

"Most UK investors have some exposure to UK equity income funds, so I think global equity income funds are worth a look to add some diversification to a portfolio. Newton has got an excellent track record in this area and the Newton Global Higher Income Fund has a thematic approach which has worked well. The fund yields around 4.3 per cent, which is comparable to some UK equity income funds."

26. Adrian Lowcock, senior investment manager, Hargreaves Lansdown:

Troy Trojan (GB00B05KY352/GB00B01BP952):

"Troy Trojan's fund manager, Sebastian Lyon, looks at the wider economic picture to determine his asset allocation. He believes the actions of western governments will end in higher inflation, but does not rule out a spell of deflation beforehand. He has prepared for both eventualities, structuring the portfolio around four pillars: blue-chip equities, index-linked bonds, gold and cash. He believes his equity and bond exposure should help to offset the effects of high inflation. Many companies will be able to increase their prices in line with costs and maintain profit margins in an inflationary environment. In a deflationary environment, cash should hold its value better than other assets. Gold, traditionally considered a hedge against inflation, could also provide shelter against deflation."

This fund is available on fund platforms, including Alliance Trust Savings and Hargreaves Lansdown.

CONTRARIAN BETS

27. Jason Hollands, Bestinvest:

GLG Japan Core Alpha Equity D H GBP (IE00B665M716):

"Japan has been comprehensively out of favour with investors since its extraordinary bull market of the 1980s came to an abrupt end. While there have been occasional false dawns, Japan has suffered from political gridlock, lack of reform and a strong currency which has undermined its international competitiveness. Japanese companies, which include many global leaders in technology and manufacturing, are cheap on most measures, with companies trading below their book value. So why invest now? A recent change in political direction has led to massive stimulus policies and aggressive weakening of the Yen. While this approach is not without risk, if successful it could result in fundamental reappraisal of Japan and propel its markets higher. We recommend using the currency hedged share class of [IC Top 100 Fund] GLG Japan Core Alpha. The fund, managed by Stephen Harker, has a strong style bias towards large businesses which he believes are undervalued. We would expect this strategy to play out well if there is a sustained re-rating of Japanese equities." This fund does not take direct investments from the public, but you can apply via Bestinvest and Hargreaves Lansdown, which deal in offshore funds.

28. Adrian Lowcock, Hargreaves Lansdown:

Invesco Perp. High Income (GB0033054015):

"Neil Woodford is one of the most famous contrarian investors. He believes sustainable economic growth remains elusive. Companies that have been delivering growth since the banking crisis are likely to keep doing so, an ability he believes is not currently reflected in the share price. He is a stock-picker at heart even though his views on the wider economy are well documented. Performance has been tough but he has bounced back in the past. The fund has over 30 per cent in pharmaceuticals."

Fund picks for you Isa 2013