In the run-up to the autumn budget, investors may be looking to tweak their portfolio to make the most out of tax-efficient products but with so many funds to choose from, this can feel like an overwhelming task.
There is much speculation about what many be included in chancellor Rachel Reeves’ autumn budget on 30 October, including a mooted increase to capital gains tax, which is levied on profits made from selling assets.
As such, DIY investors might be looking to funnel extra cash into tax-efficient individual savings accounts (ISAs) and self-invested personal pensions (SIPPs) to help shield their money from any changes.
But with more than 4,000 funds on sale that are classified into sectors under the Investment Association’s (IA) trade body, narrowing down the right ones to add to a portfolio might feel overwhelming.
Investment platform Bestinvest compiled its latest list of 137 funds that are favoured by its research teams.
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Of this list, 103 funds are actively managed funds and investment trusts, whereby the manager aims to generate market-beating returns, while 34 are passive funds.
Some of the criteria that determined which funds made the list included those run by managers who also invested their own money in their fund, as well as those that had “crystal clear” objectives. Other factors included looking at the fund managers more concerned with the fundamentals of the businesses they invest in over short-term share prices, as well as the longevity of the manager.
Jason Hollands, managing director of Bestinvest, said: “If anyone is rushing to load up their ISA and SIPP to beat any budget tax changes, remember the 30 October deadline only applies to the contribution into the tax wrapper.”
This meant that investors “can then take their time to make their investment choices,” he added.
New ‘best funds’ to invest in
Additions to Bestinvest’s latest Best Funds List, which is published twice a year, include:
Liontrust European Dynamic (0P00006TQM.L) invests in European companies such as Danish jewellery brand Pandora (PNDORA.CO) and Zara-owner Inditex (ITX.MC).
It has generated a return of 13% over one year, below its benchmark the MSCI Europe ex-UK index, up 15%, but has beaten the benchmark’s 16% over three years, with a return of 29%.
M&G Japan (0P0000WN42.L) holds Japanese companies such as major corporations Mitsubishi (8058.T) and Sony (6758.T).
The fund has delivered a return of 10% over one-year, versus an 11% gain in the MSCI Japan index, but has returned 8% over three years against a 3% rise in the benchmark.
BlackRock Gold & General (0P0000KANP.L) invests in gold miners. Investments include Canadian company Barrick Gold (GOLD) and US mining giant Newmont Corporation (NEM). Over one-year the fund produced a total return of 38%, versus a 41% gain in its FTSE gold mining index benchmark.
Gold prices have soared recently amid escalating geopolitical tensions and lingering concerns the global economy, with the spot price at $2,649 per ounce on Thursday afternoon.
Funds that have dropped out of Best Funds List
Janus Henderson Strategic Bond (0P00008F8P.L) holds fixed income such as UK and US, known as gilts and Treasuries. While the fund offers a yield of 3.7%, it has produced a return of 8% over the past year, which is slightly behind the average of 11% among its peers in the IA Strategic Bond sector.
CT Responsible Global Equity (0P0001BHCZ.L) is another that didn’t quite make the cut this time round. The fund aims to invest in companies that offer sustainable solutions or make positive contributions to society. Tech giants Apple (AAPL) and Microsoft (MSFT) are among its top investments.
Despite the gains in such tech stocks year, the fund has not managed to beat its comparator benchmark, the MSCI World index over the last year. It has returned 18% over one-year, versus a 21% rise in the index.
UK-focused funds
Artemis UK Select (0P0000V25A.L) was one fund in the UK equities growth space that remained on the best funds list.
The fund aims to grow investor capital over five years by investing in a portfolio of small, medium and large UK companies. Stocks in the portfolio include banks Barclays (BARC.L) and NatWest (NWG.L), as well as housebuilder Vistry Group (VTY.L).
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Artemis UK Select has returned 27% over the past year, beating the FTSE All-Share tracker index’s 17%.
Bestinvest said in the report that fund manager Ed Legget “looks below the surface of a company’s financial statements to establish a forward-looking view on its health and prospects”.
North American-focused funds
In the group of North American-focused funds, US Premier Miton Opportunities (0P0000XOCD.L) also stayed on the list.
The fund invests in US companies across all sectors and sizes, with top holdings including card operator Visa (V) and investment bank Raymond James Financial (RJF).
The fund has underperformed its sector over the last year, with a return of nearly 11%, versus an average of 19% in IA North America sector. However, it has returned 328% since launch in 2013, beating the sector average of 309%.
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“We like this fund for its multi-cap approach to the biggest economy in the world and its diversity of sectors and industries,” Bestinvest said.
Ethical and sustainable funds
For those investors looking for ethical and sustainable funds, Baillie Gifford Responsible Global Equity Income (0P0001J8P1.L) is among those that Bestinvest highlighted.
Investments include diabetes drug specialist Novo Nordisk (NOVO-B.CO), tech giant Microsoft (MSFT) and heating and air conditioning group Watsco (WSO).
The fund has generated a return of 12% over the last year, though it has failed to keep up its MSCI ACWI benchmark index, which is up nearly 20%. However, the fund offers a yield of 2% and Bestinvest said that it has shown itself to be a “compelling option for income-seeking investors”.
“We believe the fund could be a natural addition for responsible portfolios and has one of the lowest fees in the sector,” Bestinvest said, with an ongoing charge of 0.54%.
To read the full rundown of which funds made Bestinvest’s latest ‘Best Funds List’ click on this link.
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