Five funds for 2020
Posted by Adrian Lowcock in Press releases category on 03 Dec 19
Markets have been on a wild ride this year, with gains for some of the world’s leading equity indices and a sharp reversal in bond yields which has seen fixed income investors also enjoy solid returns.
Even regions hampered by political uncertainty, in particular the UK, have seen strong gains for major equity markets.
Next year’s outlook appears more clouded, with the expected fallout from the UK General Election, the ongoing trade war between the US and China, and the Presidential election in the US all factors for investors to consider.
Nonetheless, there will also be opportunities to generate returns across the investment landscape.
Below Adrian Lowcock, Head of Personal Investing at Willis Owen, looks at some potential fund picks for investors for 2020 which standout as key investment calls.
Schroder Global Recovery - There have been tentative signs that the value style could come in from the cold. This approach to investing has been shunned by investors in favour of growth stocks, but at some point valuations will make this an attractive strategy. This fund applies a deep value approach established by managers Nick Kirrage and Kevin Murphy. They have worked together for over 15 years, building an impressive track record, while co-manager Andrew Lyddon was a founding member of the Global Value team in 2013. The investment process targets companies that are significantly unloved and undervalued. The universe is screened to identify companies that meet their criteria then in-depth research is undertaken by supporting analysts to ensure the financial position is tenable and earnings capable of sustained improvement. Despite the value style being out of favour for a long time, the strict disciplines employed have ensured respectable performance and this fund should be well positioned when value style returns to favour.
Merian UK Smaller Companies – Smaller companies in the UK, although packed full of growth names, have been unloved by investors this year, with many looking to avoid the UK - and in particular domestic stocks - on concerns over Brexit and political gridlock. A resolution to Brexit should unlock some value. Merian has one of the most highly regarded small and mid-cap teams, headed by Dan Nickols who is the manager of this fund. Companies must demonstrate one or more of the following characteristics: the ability to grow earnings faster than the market average for an extended period; the scope to generate a positive surprise; or the potential to be re-rated relative to the market. A pragmatic approach is taken to valuation, with various ratios and timescales used depending upon the situation. This flexible approach allows growth, value, and recovery companies to be held, but the portfolio has tended to show a growth bias.
Man GLG Japan CoreAlpha - Stephen Harker is a contrarian investor, looking for companies out of favour with investors. Focusing on the largest 300 listed companies in Japan, he looks for those businesses that appear to be undervalued when compared with rivals. He uses valuation measures including Price to Book, Dividend Yield and Price to Earnings ratios to identify companies, and then selects companies with strong fundamentals and management where he believes there is the opportunity for a turnaround. Harker uses a rigorous, repeatable process that draws on the team's extensive knowledge of the Japanese market. With the clear focus on value, long-term investment horizon and no consideration for the benchmark, the portfolio will differ from the index.
Somerset Global Emerging Markets - Manager Edward Robinson employs a style which focuses on quality companies with healthy balance sheets, high returns on equity, strong cash flow and sustainable margins. He is prepared to pay a higher price for these characteristics. The approach means the fund is likely to perform well in more difficult market conditions while it may lag behind during momentum driven rallies in technology shares that do not meet the investment criteria.
BNY Newton Real Return - Suzanne Hutchins' first priority is capital protection and then, over the long term, she looks to deliver returns of 4% above cash per annum. Hutchins runs an unconstrained and flexible approach that initially uses Newton's thematic research to identify opportunities. The fund invests in two parts; a core element which invests in shares and bonds with a long-term perspective and low turnover. Around the core, Hutchins invests in cash, government bonds and derivatives in order to reduce risk. The underlying portfolio is composed of traditional shares, albeit with significant flexibility in asset allocation.