One way of investing for a distant retirement is to pick funds that play on the long-term trends set to drive the economy and society over your working lifetime.
looks at five funds that specialise in areas widely predicted to see long-term growth.
The continuing explosion in the world’s population has driven demand for basic industries and created a middle class in emerging nations.
In M&G Global Basics
, FE Alpha Manager Graham French
can invest across the curve of economic development, looking for the companies that are well-placed to prosper from demand for consumer goods in the developing world.
Since 1990 the fund has made 560 per cent, with a notable uptick in performance since 2003; over 10 years it has gained 207.13 per cent.
Performance of fund vs sector since 1990
Source: FE Analytics
The fund’s top holding is oil exploration company Tullow Oil, while Monsanto, the agriculture giant that produces genetically engineered seeds, and miner Iluka Resources also appear in the top-10.
French has run the fund since 1995 and investors can gain access with a minimum investment of £500 and a top-up of just £10.
The total expense ratio (TER) is 1.67 per cent.
One trust aiming to benefit from the growing capabilities of medical science and the demand for pharmaceuticals is The Biotech Growth Trust
, run by specialist healthcare manager OrbiMed.
Performance of trust since launch vs sector
Source: FE Analytics
There are very few trusts or funds operating in this area, and this is by far the best performer, returning 277.71 per cent to investors over 10 years.
Over five years it has returned 160 per cent compared with 120.34 per cent from its Nasdaq Biotechnology index, which was introduced in 2006.
AXA Framlington Global Technology
is the top-performing fund in the IMA Technology and Telecoms sector over five years, having made 57.21 per cent.
Over 10 years it has returned 167.88 per cent, putting it second out of eight funds, while over three years it is the third-best performer.
The fund has large holdings in companies such as Google, IBM, Ebay and Samsung, so it is suitable for investors who want to benefit from the global boom in consumer electronics and internet use.
FE Alpha Manager Jeremy Gleeson
has run the fund since 2007, but it was launched in May 1999. It was stung badly by the dotcom crash, rising by more than 180 per cent in its first 10 months, only to see these gains eradicated by the end of 2000.
Investors would have to assure themselves that another tech bubble isn’t on the way before parting with their cash.
The dramatic fall in Facebook’s share price after its IPO earlier this year should also serve as a reminder that internet-based companies are still relatively new and their financial prospects unknown; that may, however, seem like an opportunity to the adventurous.
The minimum investment in the fund is £1,000 and the TER is 1.62 per cent.
For anyone more interested in the Google of tomorrow than the Google of today, the Unicorn Free Spirit
fund may be of interest.
Run by FE Alpha Manager John McClure, along with Fraser Mackersie, this small fund focuses on UK technology companies with strong intellectual property and a dominant position in a niche market.
Companies such as chip producer Arm Holdings and hi-tech tool manufacturer Oxford Instruments sit in the top-10 of the fund, which has made 167.08 per cent over 10 years and 61.74 per cent over three.
Performance of fund vs sector and benchmark over 10 years
Source: FE Analytics
As it focuses on small and mid cap companies, its volatility is reasonably high at 18.19 per cent annualised over 10 years.
By comparison its IMA UK All Companies sector has a score of 15.56 per cent.
The minimum investment in the £5.5m fund is £2,500 and the TER is 1.49 per cent.
The rise of Asia
Analysts disagree over whether China will suffer a hard or soft landing, and to what extent other Asian countries will suffer as a result, but no-one denies the long-term trend is for the rise of Asian wealth and power.
Many of the stronger funds focusing on Asia are soft-closed due to overwhelming demand, so the new investor has to carry out more research.
One worth considering is Aberdeen Asian Smaller Companies Investment Trust
, which is the best-performing trust in its IT Asia Pacific exc Japan sector over three, five and 10 years.
Over a decade it has made an enormous 620.41 per cent, having seen 10 years of flat performance in the 1990s.