With ISA season firmly behind us and many commentators expressing their frustration at the marketing frenzy that takes place at the end of the tax year, investors might be looking to get ahead start by investing in funds straightaway. 
The advantages of drip-feeding into funds over time, as opposed to making one-off contributions, are well known, so there’s no need to wait another year to start saving and contributing could prove worthwhile.
Here, The Share Centre head of investment research and advisory services Andy Parsons (pictured) highlights three funds that he thinks investors might find attractive over the new ISA year.
Invesco Perpetual UK Strategic Income
FE Alpha Manager Mark Barnett has been in spotlight plenty over the past year after taking over Invesco Perpetual’s flagship UK funds following the departure of Neil Woodford. However, he had already built up a solid track record on his £1bn Invesco Perpetual UK Strategic Income fund.
Parsons said: “Historically, the High Income and Income fund were the focus for investors seeking a UK equity income investment from Invesco Perpetual. However, the Invesco Perpetual UK Strategic Income fund is an alternative offering that may prove to be just as fruitful.”
FE Analytics shows the fund has made 140.09 per cent since Barnett took over in January 2006, outperforming its FTSE All Share benchmark and both the IA UK All Companies and IA UK Equity Income sectors’ average gains.
Performance of fund vs sectors and index over manager tenure
Source: FE Analytics
Parsons likes the manager’s unconstrained style: “He seeks companies that he perceives are undervalued, with clear visibility on revenue performance, profits and cash flow, and an ability to maintain and grow dividends indefinitely. Ideally, these companies will place shareholder value at the heart of everything they do.”
Top holdings in the portfolio include British American Tobacco, BT, Reynolds American, Imperial Tobacco and AstraZeneca.
“The portfolio generally comprises around 60 to 80 stocks and the manager always considers the potential downside to an investment. It is worth noting the fund is better suited to a market trading sideways or with less momentum,” Parsons added.
Invesco Perpetual UK Strategic Income has a clean OCF of 0.92 per cent and yields 3.15 per cent. It appears on the FE Research Select 100 of preferred funds and holds five FE Crowns.
First State Global Listed Infrastructure
Parsons said: “Investment in infrastructure is a strong long-term argument and theme, particularly given the continuing economic challenges facing the world. The First State Global Listed Infrastructure fund is suitable for investors wanting global equity exposure whilst retaining a defensive, more balanced return, with many of the businesses having inflationary linked pricing embedded.”
The £1.3bn fund is managed by the FE Alpha Manager duo of Peter Meany and Andrew Greenup. It resides in the IA Global sector and invests in companies that are involved in infrastructure projects, such as utilities, airports, highways and marine ports.
“The companies often found in this fund play a vital role in delivering the world’s roads, rail networks, airports, seaports, utilities and energy networks,” he said.
“The businesses providing these key services are naturally seen as defensive and mature, suggesting reasonable levels of dividends and dividend growth. Meanwhile, high barriers to entry, strong pricing power, sustainable growth and predictable cash flows make the asset class a relatively safe haven in an uncertain financial world.”
Performance of fund vs sector over 5yrs
Source: FE Analytics
The five FE Crown-rated fund sits in the second quartile over one and three years, while achieving a first-quartile 69.57 per cent return over five years. It’s done this while achieving top decline annualised volatility and maximum drawdown scores.
First State Global Listed Infrastructure has a 0.89 per cent clean OCF, yields 2.24 per cent and is a member of the Select 100.
Polar Capital Healthcare Opportunities
Parsons also thinks that ISA early birds should look outside the mainstream assets to more niche areas, if they have the risk appetite.
He said: “For those investors seeking a higher risk sector specific investment opportunity, then I would suggest that it could be worth looking at the Polar Capital Healthcare Opportunities fund.”
Polar Capital Healthcare Opportunities was launched in December 2007 by Dan Mahony and Gareth Powell, who joined the asset management house to help set up its healthcare investment team.
Although the nature of the healthcare industry means the fund will have a high weighting to the US, Parsons likes the fund as it invests across the market cap spectrum and offers exposure to a range of themes playing out in the sector.
“Over the past year or so, we have seen a number of high profile business transactions as companies have sought to focus on specific treatments and research. However, it is worth noting that investing in a fund that specialises in a specific sector, ultimately increases the level of risk,” he added.
“This may mean that on occasion companies within the sector are perceived to be overvalued or out of favour and suffer in terms of short-term performance. Despite this, I believe that over the medium to longer term the fund should reward.”
Over five years the fund has outperformed its benchmark by more than 60 percentage points, although it has been more volatile than the index and had a higher maximum drawdown.
Performance of fund vs index over 5yrs
Source: FE Analytics
Polar Capital Healthcare Opportunities has a 1.21 per cent clean OCF.
