Fantastic four: funds with superpowers

Sam Slator 21/02/2019 in X Strategy

My daughter’s favourite question at the moment is “Which superhero do you like best?” Her next favourite questions is “What superpower would you like to have?”.

The more recent round of superhero films – those of the Marvel series – have been in production for more than a decade now and, in that time, Marvel Studios has produced 19 films, with 13 more in various stages of production. So it’s perhaps little wonder these characters are on her mind.

And, as superheroes stretch the limits of what us ordinary humans can do, so some funds stretch the boundaries of investing: doing more than a bog-standard peer. Here we highlight a fantastic four of funds doing just that – going the extra mile with ‘investment superpowers’:

1. JOHCM UK Dynamic: produces a natural yield

This fund invests in UK companies that are undergoing a substantial positive change that the manager believes is unrecognised in the current share price. He likes each holding in the portfolio to pay a dividend – a discipline designed to underpin the valuation of the holding and limit the impact of mistakes. This means that, while it is fund looking to achieve capital growth, it also produces a natural yield: currently 4.4%*. British American Tobacco, a holding in the fund, made the single largest contribution to UK dividend growth last year**.

2. M&G Optimal Income: invests in shares too

This ‘go-anywhere’ strategic bond fund has a very flexible mandate. It enables the manager to invest across all of the fixed interest asset classes, and express his views on the direction of interest rates and the relative attractiveness of government and corporate bonds, without any constraints. The fund can, and often does, also invest in shares when the manager believes they are more attractive than the company’s bonds. The portfolio had more than 11% in equities in 2014, but has just under 5%* today.

3. Man GLG UK Income: exposure to Europe and bonds

This UK Equity income fund has not just one but two extra attributes. While it invests predominantly in UK companies it can also invest in the shares of European companies that derive a substantial part of their revenues from the UK, and in a company’s bond, rather than its equity, if he feels it is a more favourable option. Manager Henry Dixon currently has 5%* invested in Europe and just shy of 9%* in fixed income.

4. TR Property Investment Trust: shares plus bricks and mortar

With a long history dating back to 1904, this investment trust became a real estate specialist vehicle in 1982. At home in the AIC Property Securities sector, it can technically invest anywhere in the world, but in practice it focuses on the shares of UK and continental European property-related companies. It will also have around 10% invested in physical property in the UK (currently 8.4%*). This helps the investment team gain first-hand information about the state of the market, without any third-party influence.

*Source: Fund fact sheet, 31 December 2018.
**Source: Janus Henderson Global Dividend Index, edition 21, February 2019.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.