Funds & ETFs 

Six highly recommended funds

Six highly recommended funds

Choosing a fund involves a lot of research, so to try to make the process easier some brokers and investment platforms produce lists of their favourite funds. But even if you narrow your search down to just these there are still hundreds of suggestions, so we have trawled through them to see which funds are most recommended by five of the main DIY investment platforms.

The fund platform fund lists we looked at were:

Bestinvest - Premier Selection (5 star ratings): https://select.bestinvest.co.uk/premier-selection

Charles Stanley Direct - Foundation Fund List: https://www.charles-stanley-direct.co.uk/Foundation_Fundlist

Fidelity Personal lnvesting - The Select List: https://www.fidelity.co.uk/investor/funds/find-funds/select-list/default.page

Hargreaves Lansdown - Wealth 150: http://www.hl.co.uk/funds/wealth-150

The Share Centre - Platinum 120: https://www.share.com/find-investments/funds/platinum-120-funds/platinum-120-funds-list/

The only fund to be recommended by all five platforms was Stewart Investors Asia Pacific Leaders (GB0033874768), which we also count among the IC Top 100 Funds. Stewart Investors Asia Pacific Leaders invests in the shares of large and mid-sized companies that are based or have significant operations in the Asia Pacific region, including Australia and New Zealand but excluding Japan. Since 2016 the fund has been managed by David Gait and Sashi Reddy. Before this it was run by highly regarded manager Angus Tulloch, who retired from Stewart Investors last year after almost 30 years at the fund house. Mr Gait also has a strong long-term performance record on other funds, including Pacific Assets Trust (PAC).

However, since the management changes at Stewart Investors Asia Pacific Leaders, the fund has underperformed regional indices such as MSCI Asia Pacific ex Japan and the Investment Association (IA) Asia Pacific ex Japan sector average. But short-term underperformance is not a reason to drop a fund, and Asian equities should be held for the long term. Stewart Investors Asia Pacific Leaders also focuses on quality sustainable companies with a strong valuation discipline so can lag rising markets, such as in 2017 when Asian equity markets surged ahead – albeit with a double-digit return of 13 per cent, against 25 per cent for MSCI AC Asia Pacific Ex Japan index. And the fund's quality focus means it should outperform in falling markets.

 

Highly recommended funds

Five funds received four recommendations each by DIY investor platforms. These include LF Woodford Equity Income (GB00BLRZQB71), run by Neil Woodford. Although he has a very good long-term record, LF Woodford Equity Income has underperformed the FTSE All-Share index and IA UK Equity Income sector average over one and three years. However, most DIY platforms are sticking with him.

Analysts at Bestinvest say: "Neil Woodford is one of the world's leading fund managers, with a very distinct style compared to his peers. He is prepared to have high exposures to favoured industries such as healthcare, and preferred companies such as AstraZeneca (AZN). Overall, his portfolios typically have a bias to more defensive stocks. This can lead to bad periods on a relative basis when such stocks are out of favour, often in fast-rising markets. However, we expect this fund to prove resilient in weaker markets and outperform over the cycle."

JOHCM UK Equity Income (GB00B95FCK64) outperforms its benchmark, the FTSE All-Share index, and the UK equity income sector average over one, three and five years. It has a total return objective but still offers an attractive yield of 4.2 per cent. It has been jointly managed by Clive Beagles and James Lowen since 2004. However, this fund is soft-closed, so is not available to new direct investors, but can still be purchased through investment platforms such as Hargreaves Lansdown, Bestinvest and The Share Centre.

Analysts at Charles Stanley say: "[The managers] seek to invest in fundamentally strong companies at an attractive price, meaning growth opportunities as well as relatively high starting yields. We like the repeatability of their process, which is always forcing the managers to look where value exists in the market, and their willingness to own both large and small companies."

AXA Framlington UK Select Opportunities (GB00B7FD4C20) has been managed by Nigel Thomas since 2002, over which time he has demonstrated a strong track record of stockpicking. According to FE Trustnet data, he has delivered a cumulative total return of 136.5 per cent over 10 years, compared with 82 per cent for a composite of his peer group.

Analysts at Hargreaves Lansdown say: "Nigel Thomas is one of the longest serving managers in the UK and we hold him in high regard. We believe his uncompromising focus on identifying growth opportunities makes this fund an excellent choice for investors seeking long-term capital appreciation."

However, over one and three years the fund's performance has lagged its benchmark, the FTSE All-Share index, and the IA UK All Companies sector average. 

Schroder Tokyo Fund (GB00BGP6BR86) aims for capital growth by investing in Japanese equities. The fund has lagged regional indices such as the Topix and the IA Japan sector average over one, three and five years.

Analysts at Charles Stanley say: "Schroder Tokyo is a predominantly larger-company Japanese equity fund, although it will also typically have an allocation to smaller companies too. It is a traditional stock research fund that focuses on identifying and buying mis-priced companies, and not making economic decisions as part of its investment process. Manager Andrew Rose is highly experienced and supported by a well-resourced and stable team of fund managers and analysts based in London and Tokyo. He has demonstrated his ability to add value over time through judicious stockpicking, although he tends not to take large positions that differ from the index."

BlackRock Gold and General Fund (GB00B99BDY18) aims to achieve long-term capital growth by investing in gold mining, commodity and precious-metal-related shares. Due to its focus on a single, specialist sector, the fund’s performance has been, and is likely to remain, volatile. Over one and three years it has underperformed its benchmark, the FTSE Gold Mining Index, and although it outperformed its benchmark over five years this was because it lost less money than it.

"[The fund] is managed by an experienced and well-resourced team," say analysts at Hargreaves Lansdown. "The fund could appeal to more adventurous investors who share the manager's belief that gold mining companies could capitalise on a higher gold price as the metal is increasingly viewed as a store of wealth."

Analysts at the Share Centre add: "The fund has a low turnover rate compared with many of its peers, and this is borne out in its slightly longer-term approach. The approach to investing is based on numerous company visits, and an overlay from a top-down perspective of how the team views the key drivers of the gold and precious metals markets."

In addition to the six funds that received four or more recommendations by the five platforms surveyed, a number of other funds were backed by at least three platforms. The table below provides the breakdown of fund recommendations by platform.

 

Funds most recommended by DIY investment platforms

Fund Investment Association SectorThe Share Centre recommendationBest Invest RecommendationCharles Stanley RecommendationFidelity recommendationHargreaves recommendationTotal Recommendations
Stewart Investors Asia Pacific Leaders (GB0033874768)SpecialistYYYYY5
AXA Framlington UK Select Opportunities (GB00B7FD4C20)UK All CompaniesYYY Y4
BlackRock Gold & General (GB00B99BDY18)SpecialistYYY Y4
JOHCM UK Equity Income (GB00B95FCK64)UK Equity Income YYYY4
Schroder Tokyo (GB00BGP6BR86)Japan YYYY4
LF Woodford Equity Income (GB00BLRZQB71)UK Equity IncomeYYY Y4
Artemis Income (GB00B2PLJJ36)UK Equity IncomeYY  Y3
Fidelity Enhanced Income (GB00BYSYZP12)UK Equity IncomeYY Y 3
Fidelity MoneyBuilder Income (GB00B3Z9PT62)
Sterling Corporate Bond Y YY3
FP CRUX European Special Situations (GB00BTJRQ064)Europe Excluding UK  YYY3
Franklin UK Mid Cap (GB00BZ8FPJ50)UK All CompaniesYY  Y3
Franklin UK Smaller Companies (GB00B7FFF708)UK Smaller CompaniesY YY 3
Fundsmith Equity (GB00B41YBW71)GlobalYYY  3
Lindsell Train UK Equity (GB00BJFLM156)UK All Companies Y YY3
Newton Global Income (GB00BLG2W887)Global Equity IncomeYY  Y3
Newton Real Return (GB00BSPPWT88)Targeted Absolute ReturnY Y Y3
Old Mutual UK Smaller Companies (GB00B1XG9599)UK Smaller CompaniesY  YY3

Source: Provider websites and Investors Chronicle

 

Performance

Fund/benchmarkYield (%)1 year total return (%)3 year cumulative total return (%)5 year cumulative total return (%)Ongoing charge (%)
Stewart Investors Asia Pacific Leaders0.8914.637.7680.89
MSCI AC Asia Pac Ex Japan index 25.45369.9 
LF Woodford Equity Income3.580.721.2na0.65
JOHCM UK Equity Income 4.217.94379.20.69
Artemis Income3.7712.333.469.80.79
Fidelity Enhanced Income*7.144.714.538.60.94
IA UK Equity Income sector average 11.531.266.4 
AXA Framlington UK Select Opportunities 0.8910.128610.83
LF Lindsell Train UK Equity*1.942051.3112.70.52
FTSE All Share index 12.233.559.3 
Franklin UK Mid Cap 2.3926.948.599.10.62
FTSE 250 Ex Investment Trust index 16.94089.9 
IA UK All Companies sector average 1434.866.6 
Franklin UK Smaller Companies  1.0329.563.1142.70.83
Old Mutual UK Smaller Companies 0.583789156.41.03
Numis Smaller companies ex Investment Companies  index 18.847.894.2 
IA UK Smaller Companies sector average 27.260.5112.3 
Schroder Tokyo*1.1413.665.2113.70.66
Topix index 15.670.8117.4 
IA Japan sector average 1872.1119 
BlackRock Gold & General 0-7.634-20.70.89
FTSE Gold Mines TR USD index -4.447.9-28.8 
Fundsmith Equity 0.7824.181.5177.80.95
IA Global sector average 14.646.987 
Newton Global Income*3.168.251.890.20.69
IA Global Equity Income sector average 10.74178.3 
MSCI All Country World Index index 13.550.299.2 
Fidelity MoneyBuilder Income3.35.314.131.40.56
IA £ Corporate Bond sector average 5.814.830.3 
FP CRUX European Special Situations 1.4422.470.21130.86
FTSE All World Europe Ex UK index 17.950.184.8 
IA Europe Excluding UK sector average 18.954.588.1 
Newton Real Return*2.322.1716.70.69
Source: Morningstar as at 08/01/2018, *performance shown is for a different share class to that mentioned in the text

 

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