Three growth ideas for your ISA or SIPP

Posted by Adrian Lowcock in Portfolio management category on 13 Mar 20

Growth is a big part of investing and shares offer the potential for you to boost the value of your portfolio. However, growth is not guaranteed and you could get back less than you invested.

If you don’t need an income just yet or wish to diversify your portfolio, a sensible approach could be to choose investments that aim to provide long-term growth. These funds typically invest in a wide range of companies, either in the UK or globally.

In addition, if you hold these investments in an ISA or SIPP then you don't have to pay any capital gains tax on the growth in the value of your investments. Although please note tax rules can change and the benefits will depend on your personal circumstances.

Here are a few of our favourite growth funds that could be considered as part of a wider portfolio.

Artemis Global Select 

Simon Edelsten looks for quality companies on attractive valuations that are poised to benefit from recognised, long-term secular growth trends. The team for this fund prefer those businesses that exhibit high and sustainable barriers to entry, sustainable cash flows, a clear capital structure and strong management. They do not pay attention to the benchmark and the managers are careful to avoid unintended risks, so holdings do not usually exceed 3% of the portfolio. The managers stick to their disciplined approach and are willing to hold cash if they do not find any attractive investments. We admire the insightful strategy of this team.

Healthcare has a significant presence in the portfolio at present with exposure to pharmaceuticals, including Norvatis and Merck, and medical devices with the largest holding being Thermo Fisher Scientific. Other top 10 positions include Microsoft and Disney, reflecting the fact just over half the portfolio is invested in the US.

First State Asia Focus  

Martin Lau and his team apply a tried and tested company selection process, which looks for quality businesses that deliver sustainable growth at attractive valuations. This fund invests predominantly in the Asia Pacific region, though it can invest as much as 20% elsewhere. Lau adopts a pragmatic, medium to long-term investment approach with a flexible style that will adapt to prevailing social and economic conditions. Company visits are of paramount importance. Capital preservation is considered the foundation for long-term capital gains, so the fund aims to produce an absolute return with a sensible balance between risk and return.

Dairy Farm is currently held in the fund. It is a leading Asian retailing group, operating across 11 countries. It has a long history of family ownership, which along with a robust management team, makes considered and responsible decisions about the business. Chipmaker Taiwan Semiconductor is also held in the fund. It generates plenty of cash and has increased the dividends it pays to shareholders in recent years.

Merian UK Smaller Companies

Merian have one of the most highly regarded small and mid-cap teams, headed by Dan Nickols who is the manager of this fund. He looks for companies that demonstrate at least one of the following characteristics: the ability to grow earnings faster than the market average for an extended period of time; the scope to generate a positive surprise; or the potential to be re-rated relative to the market. Nickols will also pay attention to what is going in the economy and uses his experience to judge how this filters down to company performance. He is also willing to hold onto his winners as they grow into larger companies.

The detailed analysis the team conducts has led to conviction in investments such as the online retailer Boohoo, which had a strong Christmas period. Other holdings include the fund manager Liontrust Asset Management and the mortgage lender OneSavings Bank.