Investors with an aggressive tilt to their portfolio could look at funds such as Rathbone Global Opportunities, Fidelity Emerging Markets and Polar Capital Global Insurance at the start of the new year, according to experts.
After revealing the 2018 picks for cautious and balanced investors from professional fund pickers at Whitechurch, BMO, Tilney, Premier and Chelsea, we now find out what they think could be considered for more risk-on portfolios.
Below, we reveal the five funds that have been tipped for aggressive portfolios as we move into 2018.
Jason Hollands – Fidelity Emerging Markets
Jason Hollands, managing director of business development and communications at Tilney, thinks that the Fidelity Emerging Markets fund could be a good option for 2018.
Emerging market equities have performed strongly in 2017 but Hollands argued that they are still trading below the longer-term trend when measured on a cyclically adjusted price/earnings basis. This makes them particularly attractive at a time when many areas of the market are looking expensive.
Performance of fund vs index over 5yrs
Source: FE Analytics
“Our key fund pick here is the Fidelity Emerging Markets fund which is managed on a team-based approach headed up by Nick Price,” Hollands said. “This fund invests in mostly larger, high quality companies within these regions, with healthy balance sheets and strong market positions. Financials and consumer discretionary stocks are well represented in the fund.”
Price runs the fund in an unconstrained manner. While he focuses on bottom-up stock picking, his macroeconomic analysis has added significant benefits to investors; in 2013 he avoided the ‘fragile five’ that suffered when the US planned to taper quantitative easing while in 2015 the portfolio benefitted when he moved towards companies with costs in weak currencies and revenues in US dollars.
Fidelity Emerging Markets has an ongoing charges figure (OCF) of 0.99 per cent.
Ben Willis – Hermes Asia ex Japan Equity
Whitechurch Financial Consultants head of research Ben Willis stays in the emerging market space but chose the Hermes Asia ex Japan Equity fund. This five FE Crown-rated fund has been one of the strongest performers in the IA Asia Pacific ex Japan sector over one, three and five years, but has been marginally more volatile than its average peer and the index.
“Fund manager Jonathan Pines has built up a strong track record from running this fund and we have identified him as a manager who can deliver index beating returns over the medium-to-long term. Pines adopts and unconstrained and high conviction approach to investing in these regional markets, and will be materially overweight to headline benchmarks and indices as bottom-up stock selection drives his process,” Willis said.
“Pines pays close attention to price and will look to stocks with cheap valuations within these markets that are displaying a valuation anomaly or offer recovery opportunities. The fund has been an exemplary actively managed fund in these markets, but definitely not one for the faint-hearted.”
The portfolio is currently overweight China, Korea and Taiwan with underweights to India and Hong Kong. Its three largest individual positions are all Chinese stocks: search engine Baidu, Chinese alcoholic beverage company Wuliangye Yibin and Chinese e-commerce, retail and technology conglomerate Alibaba.
Hermes Asia ex Japan Equity has an OCF of 0.85 per cent.
Rob Burdett – Rathbone Global Opportunities
BMO Global Asset Management co-head of multi-manager Rob Burdett moves over to the IA Global sector for his aggressive pick by highlighting the £1.2bn Rathbone Global Opportunities fund, which is top quartile over one, three, five and 10 years.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
“Rathbone Global Opportunities, run by James Thomson, is a concentrated portfolio of global ideas with good growth prospects,” Burdett said. “At a recent conference he mentioned that he is currently finding so many good ideas that the fund has its lowest ever cash position. If interest rates remain relatively under control, the kind of stocks he likes will likely do well in my opinion.”
The five FE Crown-rated portfolio currently has just 1.10 per cent of assets in cash, with 55.3 per cent in US equities and 34.25 per cent in Europe ex UK names. Top holdings include Align Technology, Tencent, Amazon.com, Facebook and Activision Blizzard.
Thomson likes companies that have easy to understand business models, a scalable strategy, pricing power and a history of under-promising but over-delivering. Conversely, he avoids stocks with issues such as special situations stories, vulnerable leadership and basing their success based on factors out of their control.
Rathbone Global Opportunities has a 0.79 per cent OCF.
Simon Evan-Cook – RobecoSAM Smart Materials
Looking at more specialist areas of the market, Premier Asset Management senior multi-asset investment manager Simon Evan-Cook chose the Luxembourg-domiciled RobecoSAM Smart Materials fund as his aggressive option – but noted that it is a long-term holding.
The five FE Crown-rated fund has generated a return of 30.99 per cent in 2017, making it the best performer of the FO Commodity & Energy sector this year. It is also either the highest or second highest returner in the peer group over three and five years.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Evan-Cook said: “This fund has had a great run this year, so may be due a soft patch in the short term. But as a long-term holding this stacks up very well.
“In a nutshell, it invests in companies that are helping to replace heavy raw materials and fossil fuels, and thereby increase efficiency and reduce pollution. These are areas that are likely to have a following wind for some time to come. In addition, the manager, Pieter Buscher, is a good manager in his own right and is just as concerned with a company’s valuation and fundamentals as he is with its ability to become ‘the next big thing’.”
Around 40 per cent of the fund’s portfolio is currently held in materials stocks, with around a quarter each in information technology companies and industrials names. Some 42 per cent of assets in the US, while Japan accounts for 15.1 per cent and South Korea 8.7 per cent.
RobecoSAM Smart Materials has a 1.36 per cent OCF.
Darius McDermott – Polar Capital Global Insurance
Chelsea Financial Services managing director Darius McDermott also went for a specialist for his 2018 aggressive picks, opting for Polar Capital Global Insurance.
“We would suggest that any single-sector fund tends to be more aggressive. In this space and given our current view on the world, the Polar Capital Global Insurance fund, which invests in global insurance and reinsurance businesses, could present itself as a good option,” he said.
“It's a very specialist area of the market but it has defensive characteristics, given that everything around us is insured. Managers Nick Martin and Alec Foster have run the fund for more than a decade and have an extensive performance track record.”
The fund has generated strong returns over the medium-to-long term. While it’s only ahead by 6.37 per cent over one year, FE Analytics shows it has made 63.97 per cent over three years, 142.74 per cent over five years and 230.08 per cent over the past decade.
Polar Capital Global Insurance has an OCF of 0.91 per cent.