Here is a selection of funds to consider for this tax year, depending on your investment horizon.
Shorter time horizon, lower risk:
Newton Real Return
This multi-asset fund targets LIBOR plus 2.5 per cent over a rolling five-year period. FE Alpha Manager Iain Stewart uses in-house expertise in global equities and combines that with his view of the world.
The fund also invests in bonds, commodities and property, and has the ability to use derivatives to provide downside protection, as well as to profit directly from declining asset prices.
The fund targets volatility somewhere between bonds and equities.
Year-on-year performance of fund vs sector
| Name | 2012 returns (%) | 2011 returns (%) | 2010 returns (%) | 2009 returns (%) | 2008 returns (%) |
| Newton Real Return | 2.98 | -0.75 | 9.29 | 10.14 | 3.98 |
| IMA Absolute Return | 3.41 | -1.26 | 4.32 | 8.61 | -3.6 |
Source: FE Analytics
The strength of the absolute return team at Newton, together with the extensive in-house research capabilities and the fund's consistent track-record in meeting its target returns make this an attractive lower-risk fund for investors.
Newton Real Return requires a minimum investment of £1,000 and has an ongoing charges figure (OCF) of 1.61 per cent
Standard Life Investments Global Absolute Return Strategies
Originally devised to service Standard Life's in-house pension requirements, this multi-asset, multi-strategy fund attempts to give a cash plus 5 per cent return over time.
It is again one of the few successful funds in the Absolute Return sector, giving consistent returns with a much lower volatility than equities.
Idea generation is diverse and I like the flexibility and scope of their strategy. Also, this is one of the few absolute return funds that does not charge a performance fee.
The £15.3bn fund requires a minimum investment of £500 and has an OCF of 1.59 per cent.
Longer time horizon, higher risk:
M&G Global Emerging Markets
Despite the departure of the co-manager in September last year, we have maintained the fund's position within the Chelsea Core Selection buy-list.
We met with Matthew Vaight recently and were reassured that, with the backing of his deputy Colm D'Olier, he is able to continue to successfully run this fund.
We like his long-term approach, and the attention paid to corporate governance and avoiding stocks that are subject to political risk.
These are important factors when investing in emerging markets. Matthew invests in quality stocks, focusing closely on valuation, which tends to lead the fund to be more defensive.
It requires a minimum investment of £1,000 and has an OCF of 1.75 per cent.
Fidelity UK Smaller Companies
Alex Wright is an up-and-coming manager in the UK Smaller Companies sector and takes an unusual approach compared with his peers, being value- rather than growth-orientated.
He looks for unloved and undervalued stocks and uses Fidelity's in-house research process for a lot of his ideas.
Performance of fund vs sector since launch
Source: FE Analytics
He has had a very good and consistent track record on the fund since he started running it.
The £195m fund is not the cheapest, with an OCF of 1.86 per cent, and requires a minimum investment of £500.
Either time horizon, medium risk:
Rathbone Income
Carl Stick strictly adheres to his investment philosophy – concentrating on businesses that can compound earnings yield for the benefit of shareholders throughout the economic cycle.
We like the fact that Carl chooses to invest across all the market cap spectrum, including an allocation towards UK small caps, unlike many of his peers. Carl has evolved his process following a period of underperformance experienced a number of years ago.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
We appreciate that managers may go through sticky periods in performance, but we like that Carl adapted his style, which has proved beneficial for investors in the fund.
The £522m Rathbone Income fund requires a minimum investment of £1,000 and has an OCF of 1.56 per cent.
Liontrust Special Situations
Run by Anthony Cross and Julian Fosh, we like the style of this fund – a buyer of businesses and not market noise.
This leads them to invest in businesses with high barriers to entry, strong cash generation and secure balance sheets. In addition, the flexible mandate enables the managers to seek an optimal blend of different-sized companies across the entire UK market.
The success of the managers' style and strategy is demonstrated by the fund's long-term track record and good performance in both rising and falling markets.
According to FE Analytics, it has beaten its FTSE All Share benchmark in each of the last five calendar years.