A quick survey of submissions to our Portfolio Clinic over the past year or so reveals almost without exception every subscriber portfolio that we review contains a selection of actively managed funds and investment trusts, mixed in with individual shares. For all the scorn poured on funds over charges and their supposed inability to outperform the market, I am not in the least bit surprised that funds are widely held by serious and experienced stockpickers. They play such a rich variety of roles. They provide solid foundations to starter portfolios and a way to learn about markets and investment strategies. They allow busy investors to outsource some of their research and stockpicking and to buy the insight that can only get from living in a country or by having access to on-the-ground reports or from acquired knowledge and expertise.
If you read our Top 50 Funds from start to finish you can get a glimpse of the trends that professionals are paying attention to and the myriad of styles they employ. Their thinking can be instructional, too. Cormac Weldon at Artemis US Select pays as much attention to evaluating financial markets and economic risks as he does to individual investment opportunities, while at Baillie Gifford Japan, Matthew Brett and Praveen Kumar like to keep their eyes on the long-term potential value of stocks and on finding disruptive companies. At FTF Martin Currie Japan Equity manager Hideo Shiozumi believes Japan is on the path to greater deregulation and is becoming more services-based so he is concentrating on stocks that exploit these opportunities.
Funds offer easy access to the four corners of the globe, to unlisted markets and to companies that require specialist knowledge. They remove risk and highlight it too when managers change tack, which means that funds aren’t as demanding of your attention as individual shares – managers will or should spot the oncoming threat and defuse it.