INVESTORS are being urged to look beyond the fund-manage-ment giants and focus
on potential stars of the future when investing this year’s Isa.
With just two months left to shelter £7,000 free from the tax-man, many
investors are nervous about committing money to an Isa this year. The FTSE
100 index of leading companies is 14% lower since its peak in June last year
and down 10% since the start of 2008.
But for those who still want to make the most of the tax-free allowance, we
asked 25 of the top financial advisers and fund of fund managers in the
country to give us their tips.
We asked them for their favourite UK manager, as well as for their tips in
other major sectors such as America, Europe, Japan and Asia. We also asked
for their favourite manager overall, assuming investors already have a
balanced portfolio.
While some recommended well-established stars – Neil Woodford of Invesco
Perpetual was the most highly rated UK manager – many suggested largely
undiscovered talent.
Nick O’Shea at Pharon, an adviser, said: “So-called stars running large sums
of money can become blinkered. Less-est-ablished fund managers, eager to
gain a following, usually have a more flexible viewpoint, which can boost
returns.”
Spotting unrecognised talent is easier said than done. Take the case of James
Ridgewell of New Star, who was touted in huge billboard adverts in 2006 but
who has failed to deliver.
Nevertheless, advisers said they would be happy to invest their money with
some relative unknowns, based on their track record and their investment
strategy. Here are 10 of their tips.
UK
Tom Dobell, M&G
As Britain’s oldest unit-trust company, M&G can’t be described as
undiscovered, but its team of managers still includes some hidden gems.
Chief among these is Tom Dobell, manager of M&G Recovery, whom several
of our panel made this year’s choice.
Brian Dennehy at Dennehy Weller, an adviser, said: “Although he doesn’t have
the profile of Anthony Bolton or Neil Woodford, he has beaten most of his
rivals over the past five years. He also outperformed last year when many
other outstanding managers stumbled.”
Dobell took over the M&G Recovery fund in 2000. Over the past five years
the fund has gained 140%, compared with 96% for the average UK fund. He lost
money during the credit crunch but has still beaten the average fund: his is
down 6% against an 8% average.
The 43-year-old manager targets companies that are out of favour but ripe for
a recovery. His biggest investments include Royal Dutch Shell, whose results
recently disappointed investors; HSBC, which has slumped 20% over the past
year; and unloved telecoms firm Vodafone.
Greg Bennett, Marlborough
Marlborough’s 36-year-old UK Equity Income fund manager is a new kid on the
block, but O’Shea thinks he has a bright future. Income funds have had a
tough time, but Bennett has limited the damage. Over the past year his
fund’s performance has been flat, compared with an average 11% fall in his
peer group.
MULTI ASSETS
Sebastian Lyon, Troy Asset Management
Multi-asset funds that blend equities, bonds and cash in one scheme are
supposed to limit losses when the markets take a turn for the worse.
Many have disappointed as the credit crunch has taken its toll, but some funds
stand out from the crowd. Advisers would turn to the Trojan fund from a
small boutique, Troy, for a “safe haven” to ride out further stock market
turmoil.
The founder and chief execu tive of Troy Asset Management, Sebastian Lyon,
aims to deliver positive returns in falling and rising markets by investing
in a spread of assets. He has limited losses through a 3% holding in gold,
15% in bonds and 22% in cash. The fund has dropped 1% over the past six
months and is up 32% over three years.
EUROPE
John Baker and Jon Ingram, JP Morgan
Some advisers are tipping Europe for this year’s Isa because the global-market
turmoil has offered the chance to pick up world-beaters such as Italian
car-maker Fiat and German chemical company BASF at bargain prices.
The European sector is home to some high-profile managers, but advisers said
these two relative unknowns from JP Morgan are worth a look. Donna Brad-shaw
at IFG, an adviser, said: “They have consistently outperformed their rivals
with their stock-picking approach.”
Overall, Philip Wolstencroft, who runs Artemis European Growth, is this year’s
favourite – backed by 10 of our panel – but the JP Morgan duo have a better
record and are more defensive in difficult markets. Over the past six months
JPM Europe is down 3%, while Artemis European Growth has dropped 9%. Over
three years JPM’s team is up 59%; Artemis has gained 46%.
AMERICA
Tom Walker, Martin Currie
America is the contrarian’s choice for this year’s Isa because its economic
slowdown is further advanced and the Federal Reserve Board, its central
bank, has been quick to administer rate cuts to get the economy moving
again.
Edinburgh-based Martin Currie used to figure highly in advisers’ lists of
favourites, but following a period of poor performance it fell from grace.
Walker, manager of its North American fund for the past five years, is
leading the charge back.
Over the past five years the fund has returned 58% against 35% from the
average scheme. Over one year, it is up 4% compared with a 4% fall in the
typical fund. He has been given the highest triple-A rating by fund analysts
at Citywire.
JAPAN
Stephen Harker, Soc Gen
The outlook for Japan is being hotly debated, with a huge gulf between those
who expect it to remain in the doldrums and those who believe this will be
the year it will recover.
Some of our panel, such as Alan Steel at Alan Steel Asset Management,
recommended investors to steer clear. However, bulls point out that Japan is
seriously undervalued, with roughly one in 20 stocks trading below the value
of their assets. If you side with the bulls, Stephen Harker at SocGen Asset
Management is the choice of the experts.
He runs the SG Japan Core Alpha fund, which is down 1% over the past six
months, while the average fund has fallen 10%.
ASIA
Jason McCay, Martin Currie
Will the Asian boom be derailed by a slowdown in America? It’s one of this
year’s big questions. Even if it is, advisers and fund managers believe Asia
is still a great place for long-term growth.
Asian managers who have established track records, such as Hugh Young at
Aberdeen and Angus Tulloch at First State, remain the advisers’ favourites.
However, 39-year-old Jason McCay, who runs Martin Currie Asia Pacific, is
tipped as one to watch. Over the past year the fund has gained 22% against
19% for the average Asian fund, beating Young, who was up 15%, but behind
Tulloch, whose fund rose 28%. Over five years he has returned 229%, against
a 173% gain in the average fund.
Anna Bowes at AWD Chase de Vere, an adviser, said: “Jason and his team have
proved themselves as talented as their better-known rivals.”
EMERGING MARKETS
Clayton Gillece, City of London
Given the risks of investing in emerging markets, our panel prefers
established names such as Mark Mobius at Templeton and Tulloch at First
State.
However, some believe backing less well-known names will pay off. The
“unknown” that was mentioned most often was Clayton Gillece, who runs City
of London Emerging World.
His fund is Dublin-domiciled but is Isable, and over the past year has
returned 30% compared with 20% from the average emerging-markets fund.
Mick Gilligan at Killik, a stockbroker, said: “It is unusual in that it
invests in investment trusts that in turn invest in emerging markets, many
of which look cheap after the recent sell-off. As the discounts on these
funds narrow, City of London Emerging World will benefit.” Gillece favours
funds investing in China, Russia, India and Brazil.
COMMODITIES
Ian Henderson, JP Morgan
Merrill Lynch’s Gold and General fund tends to get all the attention, but Ian
Henderson, who runs JP Morgan Natural Resources, gets more votes from our
panel.
He invests in a broader spread than just gold, so should withstand any
correction in the price of the precious metal. Over the past year JPM
Natural Resources has returned 36% and over five years it is up 423%.
BEST OVERALL
Robin Geffen, Neptune
We asked our panel which manager they would back if they could only choose one
fund for this year’s Isa.
Philip Gibbs of Jupiter Financial Opportunities was a popular choice in
expectation of a rebound in bank and insurance stocks. However, he was
pipped to the top spot by Robin Geffen and the Neptune Russia and Greater
Russia fund.
Although he has a firm following among advisers, many private investors have
not heard of him because Neptune does not spend large amounts of money
promoting funds.
The fund is up by 20% over the past year and 11% over the past six months, but
you shouldn’t invest if you can’t stomach high risks.
SOMETHING FOR WHEN SHE GOES TO COLLEGE
JOANNE JONES, 31, entrusted Tom Dobell at M&G Recovery with her daughter
Chloe’s nest egg.
Joanne, a nursery nurse from Bury in Lancashire, hopes the Isa money she has
invested will have turned into a healthy sum by the time Chloe, seven, is
ready for university.
Since Dobell took over the fund in 2000 it has gained 65% while the average UK
fund has returned 18%.
Joanne, pictured with Chloe and Ryan, four, said: “Like most funds it has lost
money over recent months, but its long-term record is great.”
