For more than two years, Brexit has hung over UK investors’ heads and created uncertainty over what the country will face when it leaves the European Union in March 2019. 
Concerns over Brexit can be seen in the underperformance of the UK equity market since the referendum in the summer of 2016 and numerous fund manager positioning surveys show significant underweights to the country.
Ed Monk, associate director for Personal Investing at Fidelity International, said: “It is understandable that UK investors are looking for safe havens in the market given the great uncertainty that Brexit still represents. Switching your investments wholesale to avoid one particular outcome, however, is rarely a winning investment strategy.
“There are a lot of diverging opinions and predictions regarding what the position of the UK will be in the coming year. While there may be stocks that are currently priced at what seems to be a ‘Brexit discount,’ there are also sure to be ‘value traps’ where the current low price is more than justified.”
Monk added that one way to mitigate this uncertainty is to avoid betting on a particular outcome and to spread investments across geographies and asset classes.
Below, we look at four funds that Fidelity thinks could be good options in this context.
LF Lindsell Train UK Equity
First up is the popular LF Lindsell Train UK Equity fund. This £5.5bn fund holds five FE Crowns for its superior performance in terms of stock-picking, consistency and risk control in recent years.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Monk said: “Managed by Nick Train, this fund aims to capitalise on global consumer brands; owners of media or software intellectual and capital market proxies. The fund looks for undervalued, profitable companies whose brands and market positions allow them to ‘offer something truly unique’.”
Big names such as Diageo, Unilever, RELX, Mondelez and Hargreaves Lansdown are the fund’s largest positions. It is running big bets in areas such as financial services, beverages and personal goods.
As the chart above shows, the fund has a track record of significant outperformance, with FE Analytics showing it sitting in the IA UK All Companies sector’s top decile over one, three, five and 10 years.
LF Lindsell Train UK Equity has an ongoing charges figure (OCF) of 0.70 per cent and is yielding 1.84 per cent.
Fidelity Global Dividend
For investors looking for equity exposure outside of the UK, Monk highlighted the Fidelity Global Dividend fund, which is managed by Daniel Roberts. The £883m portfolio is built around resilient businesses offering the prospect of long-term income growth and capital protection.
“Fidelity Global Dividend is well diversified and defensive, tending to perform well when recent hot sectors like technology do not,” Monk said. “With a focus on high-quality, growing dividend streams, the fund is also designed to protect against rising inflation. It feels like 2019 could be this fund’s year.”
Performance of fund vs sector and index since launch
Source: FE Analytics
The portfolio is overweight defensive sectors such as consumer staples, healthcare and utilities, while being underweight areas like consumer discretionary, communications and materials. The FE Invest team, which has the fund on its Approved List, describes it as “a no-brainer for cautious investors”.
According to FE Analytics, the fund sits in the top decile of the IA Global Equity Income sector over one and five years but slips in the fourth decile on a three-year view.
Fidelity Global Dividend has a 0.93 per cent OCF and is yielding 2.62 per cent.
Investec Global Gold
Gold is a traditional safe haven holding for investors worried about market or macroeconomic turmoil and Monk suggested that a good way to gain exposure to the yellow metal is through a fund such as Investec Global Gold.
“Gold-related investments could add a further element of stability,” he explained. “One way of doing this is to invest around 5 per cent into a gold fund, such as the Investec Global Gold fund. This fund provides exposure to gold via a diversified portfolio of gold mining company shares.”
Performance of fund vs index over 5yrs
Source: FE Analytics
The £206.2m fund is headed up by FE Alpha Manager George Cheveley. The approach behind it maintains that the shares of gold mining and extracting companies can outperform gold bullion over the long term because companies can work on costs and margins to boost their profits by more than just gold’s performance.
Since Cheveley was appointed to the portfolio in April 2015, it has generated a 33.45 per cent total return, compared with a 16.37 per cent rise in the gold price (as presented by the S&P GSCI Gold Spot index).
Investec Global Gold has a 0.89 per cent OCF.
Fidelity Select 50 Balanced
Monk’s final pick for investors seeking to insulate portfolios against Brexit is Fidelity Select 50 Balanced, which he said “offers a new one-stop way of investing across different asset classes and all around the world”.
“This fund, managed by Ayesha Akbar, has navigated a steady course through 2018’s volatile markets,” he added. “Ahead of another uncertain year, that stability is likely to remain a big attraction in 2019.”
Performance of fund vs index since launch
Source: FE Analytics
It only launched in February 2018 and since then has made 0.60 per cent, compared with a 4.67 per cent gain in the MSCI AC World index (although it must be noted that the fund does not have a benchmark). The fund has been less risky than the market, however, with its annualised volatility standing at 7.23 per cent against 11.26 per cent for the index.
The fund-of-funds offering has around half of its portfolio in equities, with 31 per cent in bond and 10 per cent in ‘cash and other strategies’; it also has exposure to areas like property and commodities. M&G Corporate Bond is the largest individual holding, followed by Fidelity Strategic Bond, Colchester Global Bond and LF Lindsell Train UK Equity.
Fidelity Select 50 Balanced has an OCF of 1.25 per cent.