In order to make the most of their money, investors are advised to take on greater equity exposure in their pension portfolio and add an extra kick by buying in to high-growth areas.
With this in mind, FE Trustnet asks three industry experts which funds fit the bill for a long-term investor hoping for high levels of capital appreciation over the next couple of decades.
BlackRock UK Special Situations
AWD Chase de Vere’s Patrick Connolly (pictured) says investors in search of long-term growth do not need to look too far afield.
"I like the BlackRock UK Special Situations fund," he said. "Yes, it is a fairly high-risk fund, but it is ideal for a long-term investor." "The fund has a small to mid cap bias which over the long term tends to outperform large caps, albeit with a higher degree of volatility."
"The manager has a long and fairly distinguished track record and has proven he knows what he is doing."
"Even if economic growth in the UK looks subdued, he can look to companies than derive the majority of their earnings from overseas."
"At the moment, he is currently playing the emerging markets growth theme," he added.
| Name | BlackRock UK Special Situations |
|---|---|
| Fund Size | £1.7bn |
| Min. Investment | £500 |
| OCF | 1.67% |
| Yield | 1.20% |
| Manager | Richard Plackett & Roland Arnold |
| FE Crown Rating | 2 Crowns |
Source: FE Analytics
The £1.7bn BlackRock UK Special Situations fund is run by FE Alpha Manager Richard Plackett and Roland Arnold.
According to FE Analytics, it is a top-quartile performer in the IMA UK All Companies sector over 10 years, with returns of 231.49 per cent. Its benchmark – the FTSE All Share – has returned 151.27 per cent over this time.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
BlackRock UK Special Situations is also a top-quartile performer over three and five years; however, investors should not ignore the fact that the fund has been considerably more volatile than the sector and index over the short, medium and long term.
JPM Emerging Markets
Connolly likes emerging markets as a long-term growth play, but admits it is becoming difficult to find the right fund in this area of the market given the recent soft-closures of the sector-topping First State and Aberdeen funds.
"The question is, who is next on the list?" he asked. "We think that it must be a group that is as well-resourced, so I would go for the JPM Emerging Markets fund."
| Name | JPM Emerging Markets |
|---|---|
| Fund Size | £1.1bn |
| Min. Investment | £1,000 |
| OCF | 1.68% |
| Yield | 0.41% |
| Manager | Austin Forey & Leon Eidelman |
| FE Crown Rating | 3 Crowns |
Source: FE Analytics
JPM Emerging Markets is managed by Austin Forey, who has been running the fund since 1997. He was joined by co-manager Leon Eidelman in January this year.
It is the fourth-best performing fund in the IMA Global Emerging Markets sector over the last decade, with returns of 400.92 per cent.
Its MSCI Emerging Markets benchmark and the sector have returned 360.82 per cent and 332.58 per cent over this time, respectively.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund has also beaten the sector and index over one, three and five years.
JPM Emerging Markets’ largest overweight positions are in China, India, Brazil and South Africa. The fund is underweight Taiwan, Russia and Mexico compared with its benchmark.
It has £1.1bn in assets under management.
Schroder Asian Alpha Plus
Chelsea Financial’s Darius McDermott also likes the emerging markets, but more specifically Asian equities.
"We continue to like the emerging market growth theme and we believe Asia will continue to do well," he said.
"I also think that Asian currencies will outperform developed currencies and one of our favourites in the region is Schroder Asian Alpha Plus."
| Name | Schroder Asian Alpha Plus |
|---|---|
| Fund Size | £492.6m |
| Min. Investment | £1,000 |
| OCF | 1.70% |
| Yield | 0.20% |
| Manager | Matthew Dobbs |
| FE Crown Rating | 5 Crown |
Source: FE Analytics
Matthew Dobbs has managed the £492.6m Schroder Asian Alpha Plus fund since its launch in November 2011.
Its returns of 75.62 per cent over this time make it the seventh-best performing fund in the IMA Asia Pacific ex Japan sector.
It has also nearly doubled the returns of its benchmark – the MSCI AC Far East ex Japan index – since launch.
Performance of fund vs sector and index since Nov 2007
Source: FE Analytics
The five crown-rated fund is also a top-quartile performer over three and five years.
Threadneedle UK Equity Alpha Income
While emerging markets can offer high growth, McDermott says that long-term investors should not ignore the benefits of UK equity income.
"I always think a good old equity income fund is good for a long-term investor," he said.
"Compounding of dividends generally equates to 60 to 70 per cent of total equity returns. We like the Threadneedle UK Equity Alpha Income fund for this type of exposure."
"The fund is headed up by Leigh Harrison and Richard Colwell and they have a solid track record."
"The fund is slightly more correlated than the other funds they run so is slightly higher risk," he added.
| Name | Threadneedle UK Equity Alpha Income |
|---|---|
| Fund Size | £396.7m |
| Min. Investment | £2,000 |
| OCF | 1.64% |
| Yield | 4.20% |
| Manager | Leigh Harrison & Richard Colwell |
| FE Crown Rating | 4 Crowns |
Source: FE Analytics
FE Alpha Manager Harrison has managed the £396.7m Threadneedle UK Equity Alpha Income fund since its launch in May 2006. He was joined by Colwell in September 2009.
The fund – which has a yield of 4.2 per cent – is a top-quartile performer in the IMA UK Equity Income sector over one, three and five years.
Over the past half decade the fund has made 43.27 per cent, while the FTSE All Share and sector have returned 31.97 per cent and 30.23 per cent, respectively.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Harrison and Colwell run a highly concentrated portfolio of just 35 holdings. Their top-10 includes UK blue chips such as L&G, BT, RSA Insurance, GlaxoSmithKline and Unilever.
Rathbone Global Opportunities
Richard Troue (pictured), investment analyst at Hargreaves Lansdown, says FE Alpha Manager James Thomson’s Rathbone Global Opportunities fund is a good fit for a long-term investor.
"The fund is growth-focused and Thomson concentrates on companies that have something unique about them, basically a 'best in breed' company that can capitalise from a more niche area of the market," he said. "He is a long-term investor who holds a number of businesses across the developed markets."
"For instance, he has been a fan of Rightmove for a long time and it is a company that has benefited from the popularity of the internet."
"He has weatherproofed his portfolio since he had a poor 2008. However, it is a concentrated fund that will have its ups and downs."
"Nevertheless, it is still a racy enough fund that will suit an investor looking for long-term growth and who is prepared to take on more risk."
| Name | Rathbone Global Opportunities |
|---|---|
| Fund Size | £228.3m |
| Min. Investment | £1,000 |
| OCF | 1.57% |
| Yield | N/A |
| Manager | James Thomson |
| FE Crown Rating | 4 Crowns |
Source: FE Analytics
The £228.3m Rathbone Global Opportunities fund is the fourth-best performing fund in the IMA Global sector over 10 years, with returns of 246.22 per cent.
It has beaten is FTSE World benchmark by nearly 100 percentage points.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Our data shows the fund lost a painful 39.39 per cent in 2008, which has contributed to its third-quartile performance over five years.
However, it has bounced back since then and is a top-quartile performer over three years.