Short of ISA ideas? This week as part of our Guide to ISA Investing we reveal the top rated and top performing stock and fund ideas – as well as sharing where the experts stash their cash, the latest news from the 2017 Budget Report and how to reduce your tax bill.
Looking for ISA investment ideas? Who better to take your cue from than the professional fund pickers? Using the Morningstar X-Ray Tool, we took a look under the hood of six of the biggest and best fund-of-funds in the business. We compared the underlying holdings of F&C MM Navigator Progressive, managed by Gary Potter and Rob Burdett, Fidelity Multi-Asset Income, managed by Eugene Philalithis and Nick Peters, Jupiter Merlin Balanced and Jupiter Merlin Income, run by John Chatfeild-Roberts’ team, Old Mutual Managed and Schroder MM Diversity.
The top 10 holdings across all six funds are listed below, with Morningstar analyst views where applicable.
Schroder Special Situations Sterling Liquidity Plus
This institutional fund is not available to UK private investors. It invests in financial bonds, with holdings including gilts, and corporate debt issued by Lloyds Bank, UBS and ABN Amro. It is listed in Luxemburg and is the largest holding across the portfolios at 4%. Despite this being the largest allocation across all the fund-of-funds it is only held by one manager, Marcus Brookes of Schroder MM Diversity. Brookes has a huge 23% in Special Situations Sterling Liquidity Plus.
Evenlode Income
This is the second most popular fund, with a 3.9% allocation across the six portfolios. It is held in both Jupiter Merlin portfolios. Chatfeild-Roberts and his team were earlier backers of the Evenlode Income fund, significantly swelling assets under management when they first invested in 2014. Evenlode is invested in UK listed dividend-paying stocks, managed by Hugh Yarrow, formerly of Rathbones, and has a five-star performance rating. Yarrow recently told Morningstar that investors should be wary of businesses growing their dividends through cheap debt.
Findlay Park American
The third most popular fund, with a 2.8% allocation across the group is held by Jupiter Merlin Balanced and F&C MM Navigator Progressive. Another top performing fund, this receives a five-star performance rating. It also ranks highly in Morningstar’s sustainability rating, with four globes. The fund, run by Charles Park and James Findlay aims to achieve a return above the performance of the Russell 1000 Index. Its largest holdings are technology stocks and financial services companies.
Fundsmith Equity
This Bronze Rated, five-star fund makes up 2.7% of the group holdings and is in the portfolios of both Jupiter Merlin funds. The Fundsmith Equity fund remains an attractive choice for investors seeking global equity exposure, says Morningstar analyst Muna Abu-Habsa. “Terry Smith launched the fund in Nov 2010 on the back of the success he achieved as an investment advisor to the Tullett Prebon pension fund; over his tenure the fund has moved from a deficit to a surplus,” she explains. “Smith is a well-known personality, having headed up a number of FTSE companies, and he is an original thinker, often demonstrating his willingness to bet against the crowd.”
Old Mutual North American
This Bronze Rated, five-star fund makes up 2.5% of the group holdings. “This is a solid quant-led offering for investors seeking exposure to North American equity,” says fund analyst Fatima Zhizou. “The fund’s poor performance during the financial crisis not only led to analyst departures but also to a change in its process in 2009. But we now consider this team to be sufficiently resourced and we are particularly encouraged with recent years’ stability in the core portfolio management team.”
Old Mutual UK Equity Income
This Neutral Rated fund makes up 2.2% of the group holdings. The 18 months to the end of November 2016 were challenging for this higher-yielding UK equity-income fund, but we continue to have conviction in its long-term prospects, say Morningstar fund analysts, who downgraded the fund following a period of flux and underperformance.
CF Woodford Equity Income
This Silver Rated fund is held by both Jupiter Merlin portfolios, with a 2.1% allocation across the six fund-of-fund portfolios we put under X-Ray. The approach is best described as high-conviction, long-term, and contrarian in nature, and it sees manager Neil Woodford combine his macro views with bottom-up stock selection.
Fund analyst Peter Brunt says Morningstar’s “confidence is growing in this fund”. He continues: “It is managed by one of the most talented fund managers in the equity income sector, and, after some initial teething problems, we are reassured to see a period of increased stability at Woodford Investment Management.”
Jupiter Income Trust
This Bronze Rated fund is held by both Jupiter Merlin portfolios, with a 1.9% allocation across the six fund-of-fund portfolios we put under X-Ray. Brunt says this fund is a solid offering for investors seeking a UK equity-income fund with a contrarian value approach. The nature of the fund's approach can result in periods of underperformance, but manager Ben Whitmore has proved his ability to add value over the long term.
Jupiter UK Special Situations
This Silver Rated fund also has a five-star performance rating. Fund analyst Brunt says this too is a ompelling offering for investors looking for a value-biased larger-cap UK fund. It is also managed by Whitmore, whose approach reflects his genuinely contrarian and value-oriented investment philosophy. He uses quantitative screens to identify companies that have attractive characteristics based on two key metrics: Graham-Dodd P/E ratio and a Greenblatt screen that ranks companies based on their earnings yield and return on capital. Qualifying stocks are then subject to fundamental analysis before being added to the portfolio, which is unconstrained relative to the FTSE All-Share benchmark.
JP Morgan Income Opportunities Plus
This fund aims to achieve a return in excess of the benchmark by exploiting a wide range of investment opportunities in, amongst others, the fixed income and currency markets, using derivative strategies where appropriate
