Here are five that have the backing of industry experts:
Standard Life UK Equity Unconstrained
"In a risk-on environment, this is the one fund that you want to own – in the UK at least," said Rob Morgan (pictured), fund analyst at Hargreaves Lansdown. "It consistently does very well in a cyclical rally. It’s pretty terrible when the market goes down, for obvious reasons, but overall, it seems to end up better than when it started, even though it’s horrendously volatile."
According to FE data, the £494m fund has returned 171.9 per cent since its launch in September 2005 – around four times as much as its sector and benchmark.
Year-on-year performance of fund vs sector and index
| Name | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|---|
| Stan Life Inv - UK Equity Unconstrained | -20.47 | 38.5 | 99.17 | -41.05 | -3.16 | 35 |
| IMA UK All Companies | -7.04 | 17.53 | 30.4 | -31.96 | 1.85 | 17.38 |
| FTSE All Share | -3.46 | 14.51 | 30.12 | -29.93 | 5.32 | 16.75 |
Source: FE Analytics
Manager Ed Legget had a particularly good time during the up markets of 2006, 2009 and 2010, although overall he has been far more volatile than his peer group.
After the first-quarter rally of this year, it was number-one in its UK All Companies sector, with returns of 23.08 per cent.
Legget is currently overweight industrials and financials, with Lloyds, Barclays, Vedanta Resources and GKN all appearing in his top-10.
Standard Life UK Equity Unconstrained has a minimum investment of £1,000 and a total expense ratio (TER) of 1.9 per cent.
M&G Recovery
"The manager [Tom Dobell] has had a tough time of it of late, but given how the portfolio is constructed, and the number of cheap stocks he owns, I think this is one that is poised to do well," said Morgan.
"A lot of the stocks have been left behind, so if you see an uptick in sentiment, these are the ones that could do well."
The £7.6bn M&G Recovery fund is one of the largest vehicles in the UK Market, and is a favourite with both advisers and private investors.
It is a top-quartile performer over the medium- and long-term, but in the last three years it has struggled, delivering returns of 18.67 per cent compared with 26.46 per cent from its UK All Companies sector average.
Dobell is currently overweight oil & gas and industrials, which have a combined weighting of around 40 per cent.
BP, Shell, Tullow Oil, First Quantum Minerals and Kenmare Resources are all top-10 holdings.
The fund requires a minimum investment of £500 and has a TER of 1.65 per cent.
JPM Natural Resources
"In a positive scenario for global growth, particularly if it’s fuelled by China, a resources fund could be poised to do well," Morgan continued.
"They’ve been really beaten up of late, but I’d be tempted to look at a sturdy one – something like JPM Natural Resources."
"It gives you broad-based exposure to resources, with around a third of its assets in energy, a third in commodity stocks and a third in precious metals."
"JPM is the major player in the market, so it’s no surprise that it’s more of a large cap focused portfolio."
"It relies significantly on commodity prices and macro themes, but you’d also expect the manager to add some value with his stock picking."
JPM Natural Resources, which is headed up by Neil Gregson, requires a minimum investment of £1,000 and has a TER of 1.68 per cent.
The fund is down over one and three years, but its long-term record is still very strong; over 10 years, it has returned more than 400 per cent.
Henderson Smaller Companies and Montanaro UK Smaller Companies
FE Alpha Manager Peter Walls, who heads up the five crown-rated Unicorn Mastertrust, tips small cap trusts to shine at the beginning of this year.
"If you’re of the opinion that markets will do well, I’d go for a small cap trust," he said.
"These tend to do well at the early stages of a recovery anyway and they’re also on a big discount – around 15 per cent on average."
"They’ve had a very good year already, but I think that’s set to continue. You often get a 'January effect', with small caps anyway, because institutional firms tend to meet in December and review the on-coming year."
"Often they decide to up their risk exposure and you see some decent money going into these trusts."
Walls says the Henderson Smaller Companies and the Montanaro Smaller Companies trusts are particularly well placed to rally.
He commented: "The Henderson trust has a very strong track record under Neil Herman, it’s liquid and yet it’s still on a decent discount [18.2 per cent, according to the AIC]."
"I also like Montanaro UK Smaller Companies. There seems to be a lot of stock floating around in it at the moment which has seen its discount go out to 19 per cent, which I think represents really good value."
"If at some point we see a significant switch from bonds into equities, you could see this sector do very well indeed, beyond the short-term," he added.
Hermon’s £346m Henderson Smaller Companies trust has significantly outperformed its IT UK Smaller Companies sector and benchmark over one, three, five and 10 years.
It has delivered 364.5 per cent over the last decade, beating both by more than 100 percentage points.
Performance of trust vs sector and indices
Source: FE Analytics
It has been significantly more volatile, however.
With an ongoing charges figure of 0.52 per cent, the five crown-rated trust is the cheapest in the sector.
David Lindley and George Cooke’s Montanaro UK Smaller Companies trust is also a consistent performer, though the managers have only recently taken charge of the portfolio. It has an ongoing charges figure of 1.34 per cent, exclusive of performance fee.