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Dancing on Isa

Market turbulence has added an extra degree of difficulty for advisers and investors who have been looking at last-minute Isa deals.

Sectors such as UK equity income, specialist and cautious managed are likely to be popular again but the major trend that has appeared is placing cash in stocks and shares Isas to sit out the volatility.

Hargreaves Lansdown investment manager Ben Yearsley says: “It means investors will not lose their allowance while having the ability to invest as they choose when the markets stabilise.”

He also believes there is value in bonds and says Invesco Perpetual monthly income, New Star extra high yield and Henderson strategic bond fund are all appealing.

Cautious multi-asset and absolute return funds are seen as options due to their ability to spread risk.

Chelsea Financial Services managing director Darius McDermott points to Insight diversified target return and BlackRock Merrill Lynch UK absolute alpha funds. He says: “The interesting thing is that these are completely different offerings. BlackRock manager Mark Lyttleton makes use of pair trades, for example, while Patrick Armstrong on the Insight fund has a host of assets and futures, such as platinum. Both are cautious offerings that are doing great numbers but I would put Insight in the lowerrisk category.”

Some commentators have suggested that traditional Isa choices such as UK equity income, multi-manager and Europe may have a less successful season but Schroders managing director UK retail Robin Stoakley says these areas have seen strong sales.

He says: “I would see our income maximiser and UK alpha plus funds as two that fit into the middle ground and can be big components of an investor’s portfolio. They are probably two of the four biggest sellers that we have.”

McDermott says: “There will always be a call for UK equity income and Neil Woodford’s Invesco Perpetual income and highincome funds are likely to be top of most adviser lists, as they have been in recent years. Investors are always going to stick with what they know, so we are likely to see the pinch come in Europe and the US where more money is likely to be taken off the table.”

Wilson Dean Financial Services director Nick Lincoln says: “We do not do masses of emerging market stuff but from what we have seen, Isa sales have tended to slacken off across the board despite there being a number of opportunities.”

The riskier end of the market has made most of the headlines in recent months. Nearly 90 of the top 100 performing funds in 2007 were invested in Asia or emerging markets, according to Lipper data, with Gartmore China opportunities growing by 71.22 per cent.

Investors’ imagination has also been caught by funds such as New Star’s Heart of Africa fund, which has grown to £52m in its first six months.

Neptune Russia and Greater Russia, managed by the group’s founder Robin Geffen, is expected to be high in most lists. Neptune forecasts global growth of 7.5 per cent for this year and says Russia has some of the best run global companies in their fields.

Geffen says: “We remain very confident on Russia, believing it will maintain its thriving and fastgrowing economy, where average wages have risen by over 20 per cent a year in each of the past three years.

“It is an environment with very low costs of transport and housing, with subsidised fuel and gas costs and no tradition of mortgages or loans of that kind. Therefore, people’s spending is directly in line with their pay increases, hence the rise of the Russian consumer.”

Skerritt Consultants head of investments Andrew Merricks says he would rather see investment into expanding economies than developed ones, should investors be able to take on the risk.

He also points to a number of specialist offerings. Merricks says: “If I were to highlight one higher-risk investment, it would be the Merrill Lynch new energy technology trust. It has been resilient in volatile markets and with governments throwing more money at climate change, it makes sense to invest in an area that the world needs.

“By contrast, if a standard client comes in, I would sway them in the direction of a sector like global equities where there is both diversity and opportunity for a fund manager to find the right winners.”

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