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Isa choices for 2012: We ask the experts for their top five tips

Four investment experts give Money Marketing their top five fund tips for the 2012 Isa season.

Skerritt Consultants head of investments Andy Merricks

Invesco Perpetual European high Yield bond fund (article continues below)

With interest rates known to be remaining historically low for at least a year or so yet, and with Government bond yields meagre to say the least, it appears highly likely that money will seek a more meaningful return from elsewhere in the coming months.  Bearing in mind that bonds can only do one of two things – default or mature – prospects look good for this fund which invests in the deeply unpopular European region. If you think that the manager can successfully avoid the majority of defaults, the yield from this fund (just above 7 per cent) looks incredibly attractive when held within the tax free environment of an Isa.

Newton global high yield bond fund

If you’re a bit nervous of investing in Europe on its own just yet, the Newton global high yield bond fund ticks the same boxes as above, but on a global scale.  The yield is nearer 8 per cent so, again, within an Isa wrapper this looks a really nice return (either for income seekers or for capital growth through reinvesting the dividends) without a massively high risk profile if you believe that Armageddon has been averted (for now!) and the world’s economies are on the verge of some kind of stability.  If you do, defaults will not pose a big threat so, even without any capital growth from the underlying bonds themselves – which seems unlikely – you will still pocket a rewarding tax free return.

Aberdeen Asian smaller companies investment trust

If you think that Asia is the source of long term capital returns, what is there not to like about Asian smaller companies? Aberdeen are justifiably well known as managers of Asian equities, so the trust’s assets appear to be in good hands, while over the longer term smaller companies tend to outperform their larger equivalents. Performance has already been strong, but if you think that the Chinese/Asian story is more than just a 5 year phenomenon, there’s no reason not to tuck this trust away for the longer term. 

Standard Life Investments UK equity unconstrained

Buckle up and hold on tight with Ed Leggett at the helm of this Oeic.  The fund is extremely volatile but over time looks likely to reward investors with a tolerance for risk. It’s either very good or very bad, but happily for its’ holders the good tends to outweigh the bad. For example, over three years it’s ranked 2 of 240 funds in a competitive sector, and 5 of 266 over six months. However, in between, it fell off a cliff and lies 250 of 256 over 12 months.  Not exactly the more serene ride enjoyed by equity income investors, but over the longer term I’d expect Leggett to deliver above average returns from the UK market if that’s where you want to invest.

The Biotech growth trust

Managed by healthcare specialists Orbimed Capital, who are probably better known for their Worldwide healthcare trust, the Biotech growth trust is showing signs of life recently which could be the prelude to an exciting year.  Performance has been consistently strong in comparison to its sector but has been fairly uninspiring overall, but in the past three months or so it has gone sharply higher.  If you are an advocate of recovery in the US market, you’ll be pleased to note that 89 per cent of this trust’s assets are US domiciled. A fairly concentrated portfolio will make returns lively but this could be a surprise package for the coming months. 

Bestinvest senior investment adviser Adrian Lowcock

Low risk /Short Term

Standard Life global absolute return strategies
The funds aim to generate a positive return above of cash of 5 per cent over the short to medium term and to deliver this return irrespective of market conditions. The fund differs from its peers in that the managers have the flexibility to invest anywhere in the world and indeed can invest in any asset class making full use of the global asset team at Standard Life.  By operating a broad number of strategies the fund could be suitable for investors looking to diversify their portfolio and reduce the volatility of their investments.

M&G strategic corporate bond
We think corporate bonds are worth investing in as the offer a route to securing income in a low growth environment.  This fund provides investors access to company debt, an asset class which can be hugely complex and often inaccessible to most investors. This fund differs in that it can also use derivatives to reflect the manager’s view as opposed to taking on additional risk. The fund, which is managed by Richard Woolnough (pictured), yields 4 per cent which is attractive in this low interest rate environment.

Medium Risk

Threadneedle UK equity income
Income is going to play an increasingly important role in investments over the next few years as growth will remain weak and interest rates are unlikely to rise in the short term. Income investing suits both those looking for growth and an alternative to cash. This aims to deliver an above average yield along with capital growth with a focus’ on strong franchises in defensive sectors and. It will include companies with growth prospects and rising dividends so has greater flexibility than some of its peers.

Newton global higher income
The income story is no longer just a UK one.  Global income funds provide investors  a more diversified income stream removing risks of volatility in the income generated and stock or region specific risk.  The Newton global higher income fund is attractive because it gives access to some of the strongest and most prominent global brands which have strong market position and the ability to sustain and growth their dividends. The fund aims to achieve a steady income and  yield 5.2 per cent. 

Higher Risk

First State global emerging markets
As wages in Asia rise the demand for goods and services will follow. There are, however, different ways to access the region.  We like First State because they take a cautious approach to investing, focusing on high quality stocks with long term growth potential.  Manager Jonathan Asante (pictured right) is a conservative manager who has conviction of his views  – an essential trait when investing in volatile markets.

Hargreaves Lansdown investment manager Ben Yearsley

Invesco Perpetual income
I know it’s a safe and boring choice, but Neil Woodford continues to excel, so why shouldn’t he be a last minute Isa choice? this fund is ideal for both first time and more experienced investors as a standalone or at the core of a much larger portfolio. Woodford is happy to position himself away from the the herd and was one of the first managers into tobacco a decade ago when it was unfashionable and more recently avoided banks and bought pharmaceuticals. Having a core of profitable, cash generative, dividend paying companies at the sore of your portfolio is no bad thing.
 
 
Aberdeen Asia Pacific
Aberdeen is one of the premier Asia investment teams. Headed by Hugh Young, their record continues to impress. Their focus on quality companies with sound balance sheets seems obvious but very few have delivered returns anywhere near as good. Asia is one of the true growth areas of world markets and deserves a place in virtual all growth investors portfolios.
 
 
Artemis global energy
The energy story is still very much intact to be honest with demand for energy expected to increase by 45 per cent over the next 20 or so years. Since the fund launched in April 2011, higher risk investments such as energy stocks have been out of favour, with investors preferring more cautious assets. The fund’s manager, John Dodd, has been lowering exposure to the euro zone. He has also reduced exposure to stocks in Russia that rely on euro zone demand for oil and gas. However, he has increased the fund’s exposure to North America, where the outlook is improving, and he also favours emerging market utilities which have good growth prospects.
 

stephen_snowden.jpg

Kames high yield bond
A recent addition to our wealth 150, I bought this fund a few months ago as the opportunity looked extremely good. A yield of about 7 per cent combined with many bonds under par creates an exciting prospect at a time when the economic outlook is improving, albeit it slowly. Kames have an excellent bond team including the likes of Dave Roberts, Steve Snowden (pictured) and Phil Millburn, manager of this fund. As long as you are prepared to take the extra risk in search of income this could be an interesting addition to a portfolio.
 
 
Neptune Russia and greater Russia
If commodities do well, Russia does well. The Russian economy and market is very closely entwined with the price of oil, gas and gold. The Russian market is trading on about 6 times earnings – almost half the price of other emerging markets. however it is this price for a reason – corporate governance being one of the crucial factors! Politics also plays a huge role, although the win of putin in the recent election certainly provides stability. Neptune were one of the first to recognise the potential of the Russian market and this could be an exciting, if volatile, isa investment.

Chelsea Financial Services managing director Darius McDermott

Lower risk: M&G optimal income

This fund is run by Richard Woolnough who, in my opinion, is one of the best fixed income managers over the last decade. He runs three retail bond funds – all of which are highly rated – but this is the most flexible of them, allowing him to move between bond asset classes and invest in areas he believes will do best at different stages of the economic cycle. Importantly, for lower risk investors who want to preserve their wealth, Richard has positioned the fund well during difficult markets, so performance has been strong.

Medium Risk: Rathbone global opportunities

James Thomson is a high conviction stock picker with a concentrated portfolio, which means each stock idea he has can contribute significantly to performance. While global equities are at the higher end of the investment risk scale, as well as performing well in rising markets, James actually did very well in protecting his investors during last year’s volatility. He had increased the fund’s weighting to cash during the summer months on the back of an increasing number of profit warnings from companies and, when markets fell, his fund held up well compared with his peers.

 

Higher Risk: Aberdeen emerging markets

Quite simply, this is a best of breed fund and has significantly outperformed its peers being a top performer over all time periods. It is run by one of the best emerging markets teams in the industry, not a single manager, and has a traditional bottom-up stock-picking approach targeting companies with trustworthy management, sound business models and healthy cashflow. The fund is soft-closing to new investors at the end of this tax year, so anyone not already invested who is thinking of emerging markets for this year’s Isa, should act before it is too late.

Higher Risk UK: Marlborough special situations

This fund is run by a highly respected, expert stock picker, Giles Hargreave (pictured) with a strong team to support him and help research stock ideas. Giles has managed the fund since its launch in 1998 and it has performed exceptionally well throughout that period, even during the volatile markets of 2008 to present. In fact, it was the best-performing UK equity fund in the Noughties. The fund focuses on small and micro-cap UK companies and the portfolio is currently skewed heavily towards industrial companies as well as technology and financials. The fund is well diversified, though with more than 250 companies at present to mitigate risk.

Income option: Newton global higher income

Most UK investors tend to stick to UK equity income funds but global funds offer diversification and access to some even better dividend paying companies around the world. The global Higher Income is broadly diversified in companies in mature markets like the UK, Europe and the US but also in companies in the emerging markets of Asia and Latin America. The fund has achieved a consistently high yield and has a good track record since its launch. It is one of my favourites in the new global equity Income sector and great for investors looking for both growth and income.

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