The difficulty in choosing an actively managed fund is the sheer number available. There are more than 3,000 unit trusts and open-ended investment companies (Oeics) domiciled in the UK, and around 300 investment trusts listed on the London Stock Exchange. But, as with any investment, if you want to make good returns you need to pick the right funds.
For this reason, each year we collate the IC Top 100 Funds, to try to help you home in on some of the better performing active funds with reasonable investment charges. Although you should hold investments in risk assets such as these funds for the long term, we review this list on a yearly basis. This is because the economic and market situation changes, and the situation can also change at individual fund level. A fund manager could leave, for example, or underperform for a number of years or a fund could increase its ongoing charge.
This year 27 new funds have joined the list.
About the list
The IC Top 100 Funds looks to cover the major sectors and asset classes most private investors might include in their portfolios. Some of the IC Top 100 Funds could be used as core holdings, while the ones focused on high-risk and esoteric assets should only account for a small portion of portfolios – preferably larger, long-term ones.
We have divided the fund list into categories to try to make it clearer what a fund does and where it might fit into your portfolio.
How we created the list
We started by looking at how each fund has performed against relevant indices and fund sector averages. Then we looked at the fund’s charges, because if these are high they can eat away considerable amounts of your returns, especially over the long-term timescale over which you should hold these funds. High ongoing charges were also the reason for a number of funds being removed from the list.
We then asked our panel of experts for their verdict on each fund, and also took into consideration a number of other sources, including the tips and articles we have written over the past year, and other analyst research and commentary. In terms of adding new funds, we considered our experts’ suggestions, our own tips and articles, and analyst research, alongside performance data and costs.
Expert panel
Our expert panel comprises nine investment professionals, including fund analysts and wealth advisers. Some of the panel reviewed open-ended funds, some reviewed investment trusts and some looked at both, as indicated. They are:
■ Emma Bird, research analyst, Winterflood (investment trusts).
■ Gavin Haynes, managing director, Whitechurch Securities (both).
■ David Liddell, chief executive, IpsoFacto Investor (both).
■ Ewan Lovett-Turner, director, investment companies research, Numis Securities (investment trusts).
■ Adrian Lowcock, investment director, Architas (open-ended funds).
■ Darius McDermott, managing director, Chelsea Financial Services (open-ended funds).
■ Stephen Peters, investment analyst, Charles Stanley (investment trusts).
■ Ben Seager-Scott, director of investment strategy & research, Tilney Bestinvest (both).
■ Ben Yearsley, investment director, Wealth Club (both).
Dos and don’ts
Do not go out and buy all 100 funds! This is a selection from which you could pick a few. Typically a fund portfolio is made up of anything between three and 15 funds, depending on factors such as its size. We will be running articles in the Money section over the year ahead on how investors with different amounts of money, timescales and risk appetites could construct a portfolio using funds. You can also see some suggestions on this in the weekly Portfolio Clinic.
This list is just a starting point, so before you invest in any of these suggestions do a lot more research. However good a fund is, if it doesn’t fit in with your investment goals, risk appetite and asset allocation, then it isn’t appropriate for you.
Before you invest, make sure you understand how the fund works and exactly what its underlying assets are, together with the risks.
This list isn’t the be all and end all – we only have space for 100 funds so consider things beyond it. We certainly do – we highlight other good funds in our articles and weekly fund tips.
Passive funds also have an important role to play in portfolios, so have a look at our IC Top 50 ETFs list for some suggestions.
Don’t sell a fund just because we dropped it from the list. We have excluded funds for a variety of reasons, and as we have a finite number we cannot include every good fund. And some decisions were a close call. If you hold a fund we have dropped there might be a number of reasons for sticking with it.
Selling can also incur tax and a trading charge. Only sell a fund after you have conducted thorough research on it.
Some of the investment trusts on the list are on high premiums to net asset value (NAV). If this is the case it may be best to delay your purchase until the premium has reduced or moved to a discount, even though the trust is still fundamentally a good proposition. We will highlight such opportunities in our articles and weekly fund tips.
We have evaluated the funds’ costs on the basis of their ongoing charge. However, you will also have to pay trading and/or holding costs on top of this. We chose the funds from a structure-agnostic perspective, but some platforms have different charging structures for investment trusts and open-ended funds, so you will also need to factor this in when deciding whether to invest in a fund.
And always remember that past performance is not a guarantee of future performance.
For a version of the list viewable on mobile phone, click here.
