Six specialist areas to add sparkle to your portfolio

While diversified bond and equity funds sit at the heart of most investment portfolios, there is a place for a little sparkle round the edges. Specialist funds can bring exposure to exciting parts of the market, improve diversification, or boost your income. Employed effectively, they can bring your portfolio to life.

What are the benefits of a specialist fund?

Specialist funds bring targeted exposure to specific sectors, such as healthcare, technology or financials. These areas may be represented in a generalist fund, but a specialist fund will allow you to super-charge your exposure in areas of particular interest.

There are plenty of different flavours for specialist funds. By finding the right option, investors can diversify their portfolios, manage risk more effectively, secure a higher income and potentially enhance returns, depending on their preference.

Managers of specialist funds will tend to know and understand their sector very well, and may be able to uncover opportunities missed by generalist managers. Of course, the downside is that these funds tend to be concentrated, so can leave you exposed if they fail to perform as expected. Even high growth areas such as technology have difficult moments.

Where to find specialist funds?

Your starting point is the Investment Association’s Specialist sector, which includes funds focusing on financial stocks, niche country funds, such as Korea or Emerging Europe, plus infrastructure or commodities funds. The IA technology, healthcare and property sectors are also worth a look for investors interested in specialist funds. From there, you can focus on the areas that interest you most.

These are some of our favourites:

Financial Innovation

A financials fund won’t just include banks, but will invest in a broad opportunity set of payment providers, asset managers, platforms and stock exchanges, offering a direct route to capitalise on the industry’s performance. The Jupiter Financial Opportunities fund, managed by Guy de Blonay, is a concentrated portfolio of ideas.

While this area is notoriously difficult to analyse, we like Guy’s expertise and his flexible approach, which sees him invest with conviction when he finds the right opportunities. He recently emphasised that the focus was on “identifying innovative and dynamic” businesses that should benefit from long-term structural trends.

Infrastructure

Infrastructure funds tap into the steady growth potential of essential facilities such as transportation and utilities, while also offering a high income that grows in line with inflation.

The M&G Global Listed Infrastructure fund invests in industries such as utilities, communications, transport, and energy. This means its manager, Alex Araujo, can have exposure to everything from toll roads to mobile towers in pursuit of the fund’s capital growth and income target.

Another option is the Schroder Digital Infrastructure fund, which seeks to take advantage of the ever-increasing demand for digital infrastructure amid the transition to a digital economy.

Read more: Your five-minute guide to digital infrastructure 

Commodities

Investors seeking a hedge against market volatility often turn to gold and mining funds, with precious metals historically acting as a safe haven in tough markets.

One unique fund in this area is Jupiter Gold & Silver. It invests in both physical gold and silver bullion, as well as gold and silver mining companies. We like the fund’s dynamic approach and manager Ned Naylor-Leyland’s willingness to alter its positioning to adapt to current market conditions.

The BlackRock World Mining Trust is another option in this space offering exposure to mining and metals companies globally. In addition to investing in quoted securities, the trust may also invest in royalties derived from the production of metals and minerals, physical metals and unquoted securities. It also offers an attractive dividend yield at 7.4%*.

Property

Property funds provide access to the real estate market’s potential for long-term appreciation and income generation.

One fund we like in this area is the TR Property Investment Trust which invests in the shares of property companies of all sizes, typically within Europe and the UK. It will also have a small amount invested in physical property in the UK.

Cohen & Steers is an industry leader in real estate securities. Both the Cohen & Steers European Real Estate Securities fund and Cohen & Steers Global Real Estate Securities fund are Elite Rated by FundCalibre and offer different investment profiles to investors by region.

Technology

The reach of technology is extending all the time. It disrupts new industries and finds new markets. Within technology are multiple themes that are shaping the future, such as digital transformation, e-commerce, and cybersecurity.

There are many specialist technology funds, but we like the Sanlam Global Artificial Intelligence fund, managed by Chris Ford, who invests in companies creating AI and benefiting from AI. The fund is unconstrained, meaning it can invest in businesses of almost any size and look beyond the familiar technology names.

Healthcare

Healthcare funds concentrate on a sector with enduring demand, as ageing populations drive increasing healthcare needs. Healthcare may also be a defensive option for your portfolio – people get sick in all economic conditions.

The Polar Capital Global Healthcare Trust invests in healthcare stocks from around the globe. These companies will predominantly come from four sub-sectors: pharmaceuticals, biotechnology, medical technology and healthcare services.

Manager Gareth Powell told us more about the underlying trends in the healthcare sector in a recent interview.

Watch the full interview: The prospects for healthcare in 2024

Multi-asset options

There are also some multi-asset funds that embrace a variety of specialist assets. This can be another option for investors who would rather hand decision-making to an expert.

For example, the WS Wise Multi-Asset Growth fund, run by Vincent Ropers and Philip Matthews, aims to provide capital growth over rolling five year periods. This fund sits in the Investment Association’s Flexible sector, meaning its managers enjoy significant freedom when it comes to deciding where to invest.

Another multi-asset product worth considering is the Brooks Macdonald Defensive Capital fund. It seeks to provide long-term growth from a portfolio of diversified assets. The fund, which aims to deliver positive absolute returns over rolling three year periods, invests in areas such as real assets, specialist lending, fixed return and structured notes.

The manager, Dr Niall O’Connor, uses a range of tools to dial up – or down – the fund’s sensitivity to market movements. This should see investors through a range of market conditions. Learn more about the fund and underlying holdings on the ‘Investing on the go’ podcast. 

*Source: fund factsheet, 31 October 2023