Q3 2021: the recovery continues
At first glance, the top performing funds on FundCalibre this quarter are an eclectic bunch, with...
With just a handful of days to go before the tax-free ISA deadline rears its head, and a nice long Easter weekend to think about what you want to do with your finances, we thought it might be prudent to ask the research team at FundCalibre which funds they are backing this ISA season and why.
“At the moment, nothing is cheap in markets. However, emerging market equities are attractively valued when pitted against their developed market counterparts. We also think there are a number of economic drivers which should set emerging market stocks in good stead over the long term. These include improving corporate governance, favourable demographics and a rising middle-class, to name but a few.
“I like Lazard Emerging Markets in particular because its manager James Donald’s value-focused investment approach is a little out of favour at the moment; this means it could be a good time to buy in. The law of mean reversion, as well as the fact that market behaviour is cyclical, means this fund could well pique investors’ interests and should present itself as an attractive long-term holding.
“James looks for unloved emerging market companies and tends to hold between 70 and 90 stocks at any one time. He aims to identify the global brands of the future and conforms to the Lazard philosophy that how a company does business is more important than where it is domiciled.”
“I’m investing for the long term, so I tend to favour equities even when stock markets are volatile. At the moment I’m nervous about the UK and think the US is toppy, so I have chosen to go global this year and add a little bit of emerging market spice on the side.
“I have invested half of my ISA allowance in T. Rowe Price Global Focused Growth Equity, which invests all over the world, is high-conviction and should benefit from the global economic recovery. I have then put a quarter of my allowance in Goldman Sachs India Equity Portfolio, which is an all-weather fund whose process works throughout the market cycle. Like the population, the investment opportunities are still young in India and Modi’s pro-business initiatives are really helping.
“The rest of my allowance is in Aberdeen Latin American Equity. Interest rates in Brazil have collapsed, inflation is falling, as is the debt and there has been a pick up in growth. Reforms are taking place in Argentina and Mexico is coping well in spite of Trump!”
“A manager who has achieved an absolutely astounding long-term track record over the years is Giles Hargreaves, who heads up the Marlborough UK Micro-Cap Growth fund.
“Giles has run this portfolio since its launch in 2004, having founded Hargreave Investment (which has since merged and become Hargreave Hale) in 1986 and has always specialised in companies which reside further down the cap spectrum. He was joined by co-manager Guy Feld in 2012, who has over 25 years’ experience investing in smaller companies..
“Both managers are well-placed to uncover some of the very smallest listed UK companies – one of the riskier areas of the market – and they have done so over the years with both strong returns and minimal nasty downside surprises.
“This fund could be held alongside Giles’s Marlborough Special Situations fund which, although it also resides in the IA UK Smaller Companies sector, has more of a focus on small and medium-sized companies as opposed to micro ones.”
“The domestic-facing stocks in our market have been beaten up in the aftermath of Brexit and this allows for the right manager to seek out individual stock opportunities. Not only this, with the valuation of sterling turning a corner and a glimmer of light at the end of the Brexit tunnel, now could be a good time to buy British.
“The UK’s medium-sized companies appeal to me and I like F&C UK Mid Cap, which is managed by Thomas Wilson. Thomas, who has co-managed the fund since 2009 and took over the helm completely in 2015, will hold between just 25 and 35 stocks at any one time. This means that it is slightly higher-risk than some other funds in the sector, but his stock selection track record serves as piece of mind – he has even managed to perform well when his value investing style has been out of favour.
“I also like the fact that he has a strong valuation discipline and that his process, while clear, is not overly rigid.”
“The Japanese market continues to be supported by loose monetary policy – both the Bank of Japan and Prime minister Abe are doing all they can to keep the long-overdue economic recovery on track.
“Compared to most other developed markets, Japan is also relatively good value and the investment opportunities are increasing: the operating environment for Japanese companies is improving and corporate profits are looking healthy.
“Inflation is still a worry – after two decades of deflation, prices are finally starting to rise, but it is still some way off the 2% target and wage inflation is still subdued, but I am confident they will get there.
“My pick is Baillie Gifford Japan Trust this ISA season. Its team are very much long-term investors and look for businesses which have clear advantages and sound business models. They pay particular attention to companies which they believe will continue to stay ahead of their competitors and grow year-in, year-out.”