We ask the experts to share their favourite funds for investors looking for a little more risk.
Feel like taking a little more risk? We asked financial professionals to share their suggested funds of 2013.
Investors should remember that past performance is no indicator of future gains and that the value of investments in particular share holdings can go down as well as up.
= Shaun Port =
= Chief Investment Office for online investment manager Nutmeg.com =
Fund Pick HSBC MSCI Indonesia ETF
Why We think Indonesia is an interesting pick for 2013. Private sector credit accounts for just 30pc of GDP in Indonesia a fraction compared to other south-east Asian economies but loans are growing at 22pc per year. The economy is growing at a steady 6-7pc per year and with growth in the rest of Asia starting to rebound, prospects for Indonesia encouraging.
The stock market has significantly lagged behind other countries in the region, notably Thailand and the Philippines, and we believe Indonesia will start to catch up in 2013.
Investing through the HSBC MSCI Indonesia ETF gives access to the largest companies listed on the Indonesian stock market, with low ongoing fees of just 0.6pc per annum.
= Mark Dampier =
Fund Pick: JPM Natural Resources
Why: If you are going for an outsider you need to look at what has had a hard time over the previous year or so. That firmly puts you in the oil, gold, resource area. JPM Natural Resources covers all three. The fund is down 36.4pc since the end of 2010, so you are clearly not buying at the top. The oil price is at about a nine-month high, gold too, and "off the top" has also done well, but the companies involved in mining and extracting have tanked. So there seems to be a good chance we'll see a re-rating at some point, if prices of the physical commodities stay at such levels.
= Philippa Gee =
= Philippa Gee Wealth Management =
Fund Pick: AXA Framlington Japan Smaller Companies
Why: If you were looking for a fund to represent a small part of your overall Isa portfolio and were comfortable with very high risk, I'd suggest AXA Framlington Japan Smaller Companies. Some believe Japan will always be a basket case, others that Japan's time to flourish is near. I tend to sit more with the sceptics, but if it does move forward, the smaller-cap side of the market will benefit the most over time.
The fund is managed by Chisako Hardie and what has impressed me is that, even in difficult economic conditions, she has delivered consistency and managed to limit the downside of markets. Ms Hardie has a good pedigree, having managed money at SWIP and Martin Currie before leading this fund from its launch in 2006. It's a small fund, at £22m, which keeps it nimble.
= Alan Steel =
= Alan Steel Asset Management =
Fund Pick: Jupiter European Emerging Opportunities
Why : Having twice read Ruchir Sharma's book on Breakout Nations he's head of Global Macro at Morgan Stanley (Xetra: 885836 - news) in NY I'd have a go at Jupiter European Emerging Opportunities. It is less than £300m in size and has underperformed Europe over three years, with positions in Russia and Turkey, and other holdings in Poland, Croatia etc. Russia has seriously underperformed, but if oil analysts at Ned Davis Research are right, oil will rise strongly as the world moves back to growth, and Turkey and Poland are tipped to be breakout nations. With Isas being free of Capital Gains Tax, this could deliver big returns if not imminently, pretty soon.
= Jason Hollands =
= BestInvest =
Fund Pick : GLG Japan Core Alpha Equity D H GBP
Why : The wildcard market this year could be that perennial disappointer, Japan. Since its bull run of the Eighties came to an abrupt end, Japan has been decisively out of favour. It suffered from poor demographics, political gridlock (which has stalled much-needed reform), a deteriorating relationship with its ever more assertive neighbour (but key trading partner) China and the impact of natural disasters. The strength of the yen has also made it internationally uncompetitive.
One of the few benefits of the strong yen, however, has been to prompt international mergers and acquisitions (M&A) by Japanese corporates. In 2004, Japanese companies typically earned around 30pc of their operating revenues outside the country now, that figure is more like 50pc. This makes them less exposed to some of the domestic challenges facing the country.
Of course, markets can stay cheap for a long time, unless there is a catalyst for a re-rating but a radical change of policy involving an aggressive devaluation of the yen and other stimulus measures (following the recent elections), could propel the market materially higher. But as a sterling-based investor we think it makes sense to hedge our currency risk, so stock returns are not offset by currency depreciation.
GLG Japan Core Alpha Equity D H GBP is the FX-hedged version of GLG's Japan retail fund. Managed by Stephen Harker, the fund has an excellent long-term record versus the market but has underperformed over the past two years as it has a strong style bias to undervalued large companies which has been out-of-favour. This could be an interesting way to play a potential re-rating story: buy cheap shares in a cheap market.
= Andy Parsons =
= The Share Centre =
Fund Pick: Standard Life UK Equity Income Unconstrained
Why: Investors seeking additional income mainly still choose the historic stalwarts of the UK Equity Income sector, which have a significant weighting towards traditional core UK blue-chip income-producing stocks. However, this fund offers real portfolio diversification within that area.
Since Thomas Moore began managing the fund in January 2009, the portfolio has benefited from his fresh and thorough review. The fund is top quartile over both three- and one-year returns and is ranked second in its sector for the year to date.
The portfolio is made up of large and mid-cap companies, with just over 50pc in the mid-cap arena. Although there are some familiar top holdings, the portfolio does not merely follow the herd the current top 10 holdings include Cineworld Group (LSE: CINE.L - news) , Hiscox, Easyjet (Other OTC: ESYJY - news) and Stagecoach Group (Other OTC: SAGKF - news) .
With a yield of around 3.04pc, we feel the fund can provide real overall portfolio diversification for investors actively seeking additional income from the UK arena.
= James Bateman =
= Fidelity Worldwide =
Fund Pick(s) Allianz US Equity/Thames River Global Bond Fund
Why: The Allianz US Equity fund has had a difficult time over the past couple of years, as the manager's long-term focus on finding mispriced growth opportunities in the US market has not found favour with investors focused on stability and certainty of outcomes. But the longer-term track record is strong and Seung Min runs a very disciplined process focused on finding solid franchises that have been overlooked or misunderstood by the market. As the recovery in the US market broadens out and solid franchises are more widely rewarded, the stored up value in this portfolio should start to come through for investors.
The Thames River Global Bond Fund suffered in 2012 when the majority of global bond funds posted positive returns. It follows a truly value-investing philosophy, looking for sustainable real yields in the global bond universe. The managers' views tend to play out in the long term, making this a fund suitable for patient investors.
= Tim Cockerill =
= Rowan Dartington =
Fund Pick: Invesco Perpetual Emerging European
Why: Emerging Europe has been off the radar for some time with investors, and this is not surprising given all the problems in core Europe. Emerging Europe and core Europe are, of course, closely linked and the debt crisis has had a knock-on effect. But now the ECB has essentially written a bailout plan for Spain, Italy or any other country in difficulty, confidence is returning.
At the centre of emerging Europe is Russia, the largest position in the Invesco Perpetual fund (69pc). It isn't without its challenges and the politics can be unpredictable, but it is a resource-rich country. Personal tax is just 13pc, which is good for consumers, and President Putin recently announced a $400bn investment in infrastructure.
The GDP forecast for 2013 is 3.6pc less than China but much better than the UK and Europe as a whole and the market is yielding 4pc on a price to earnings (P/E) ratio of 6:1, so it's cheap.
The other main area of investment for the fund is Poland, where 2013's GDP is expected to be around 1.5-2pc. The market is yielding 4.4pc and the P/E ratio is 10:1 trumping the UK, France and Germany on growth, and cheaper too.
This fund is an asset allocation play on a recovery in Europe and the world, and the knock-on benefits to emerging Europe. Managed by Liesbeth Rubinstein, the fund has one of the best records for funds investing in this region.
Ms Rubinstein seeks out companies that have strong balance sheets, good cash flow and operate in parts of the economy that are more robust and able to weather difficult conditions. At £36m, it's quite a small fund, but for investors wanting something unusual that is well placed for an improving global economy it's worth a look.
= Darius McDermott =
= Chelsea Financial =
Fund Pick: M&G Global Emerging Markets.
Why: The manager invests in any emerging market region and avoids stocks affected by political risk. He's a value investor and, contrary to what may people may think, value styles rather than growth tend to outperform in emerging markets. He has a consistent track record and does well in both rising and falling markets. Between 50 and 70 stocks are selected through strict bottom-up analysis, reflecting the manager's core beliefs that value creation, not economic growth, will deliver returns over the long term. He has 17 years experience at M&G and is backed by a well resourced team.
Most equity markets are still decent value, even after the new year rally. We may see a slight pull back in the short term, but equities are expected to do well this year. With valuations so reasonable, now is a good time to get in for longer-term investors.
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