My best fund: 12 wealth managers' top 2017 picks
Partner, Albert E Sharp, Stratford-upon-Avon
‘The Global X Lithium & Battery Tech has gained 60% in 2017 and tracks the performance of the largest, most liquid listed companies involved in lithium production and battery technology. Albemarle and FMC dominate the index, with SQM, LG Chem, Panasonic, BYD and Samsung in the top 10 holdings.
‘Surging demand for consumer electronics, energy storage and electric vehicles requires increasing amounts of lithium. Lithium-ion battery costs have halved in three years and they recharge, last longer and provide more energy per weight or volume than other batteries.
‘Governments and car manufacturers have taken steps to phase out the combustion engine and electrify fleets. Consequently lithium producers have struggled to keep up with demand amid tightening supply.
‘Whilst there are other competing battery technologies, lithium is likely to be preferred for the foreseeable future as investors bet on a surge in electric car sales.’
Investment manager, GAM, London
‘The CompAM Cadence Strategic Asia Equity fund was launched in 2015 by a team of ex-Martin Currie colleagues. With 23 holdings currently, it’s a concentrated portfolio that the manager believes has good cash generating ability and is undervalued.
‘With almost a quarter of the fund allocated to the Technology sector, it has benefitted from the strong earnings seen in key stocks such as Samsung Electronics which tripled its operating income thanks to semi-conductor memory demand tied to smartphones and data centres.
‘Whilst many have argued that the run-up in technology is of concern, the managers at Cadence seek stable growth from cash-generative firms and we believe that, should a turn in sentiment occur, this fund will offer us a good degree of downside protection. Year to date, the fund has generated 29.4% (to 15th November).’
Fund of funds manager, Royal London AM, London
‘RLAM have remained positive on Japanese equities throughout 2017, which we believe will continue to benefit from a backdrop of continued global growth, loose monetary policy and a weakening yen.
‘One fund scoring highly on our quantitative screens and whose management subsequently impressed us has been JPM Japan, where we opened a new position last year to complement the two existing Japanese funds we hold.
‘Manager Nicholas Weindling and his team focus on the top 250 listed Japanese firms, along with a selection group of smaller companies. With limited sell-side research in Japan, the team undertake a great deal of proprietary research, with additional input on export focused businesses from colleagues in these end markets.
‘The portfolio’s quality growth style has served us well this year and we’re very pleased with the performance. The fund has returned over 20% so far this year, outperforming both its benchmark and the Topix.’
Bespoke investment manager, EQ Investors, London
'My best pick for 2017 has been Henderson Smaller Companies, the oldest UK smaller companies investment trust. The manager, Neil Hermon, focuses on quality companies which gave us the confidence to invest in what is currently an unloved space, viewed as highly susceptible to a slowdown in the UK consumer.
'Like the FTSE 100, a large portion of FTSE 250 constituents generate non-sterling earnings giving us further protection against weakening sterling. The portfolio currently has 40% allocated to this market cap, and coupled with Neil’s experience we were convinced the Trust could benefit from a re-rating.
'We began to purchase the shares of the trust at 15% discount which we believed to be an attractive entry point.'
Investment manager and chair of the investment committee, Saltus Investment Managers, London
'Our best fund pick of 2017 was the UBS Currency Allocation Return Strategy which delivered significant diversification benefits and alpha to our client portfolios. The Saltus Investment Committee had identified foreign exchange markets as one of the few asset classes left with clear ‘value’ opportunities and low correlations with existing positions.
'We saw currency volatility as more of an opportunity than a threat to portfolios, provided that we could satisfy ourselves that we would be investing alongside a skilled manager with a robust investment process.
'The valuation led approach of UBS stood out to us in contrast to the more momentum or "black box" led strategies elsewhere and we became the first outside investor in what had previously been an internal only strategy.
'The fund has performed well [returning 17.4% year to date] and has been of particular use in diversifying portfolio risk away from the mainstream equity and bond markets, characteristics we think will continue to be important in 2018.'
Group head of research, Fairstone , London
' The Argonaut Absolute Return fund. This fund hasn’t been our outright top performer in 2017 but for various reasons, but its performance (or indeed the turnaround in its performance) has been the most gratifying.
'The managers have come through a tough time, and have shown both the resilience and flexibility in their investment process required to provide the necessary catalysts for significant performance improvements.
'Their renewed focus on the identification of positive and negative earnings surprises in stock specific ideas has driven a return of around 17.5% year to date and more impressively nearly 19% over the past six months alone. This compares favourably to Pan European Equity Index returns of 13.1% and 3.4% over the same respective time frames.
'This performance combined with the fund exhibiting a consistently low level of correlation to traditional long only European equities has made it an excellent portfolio diversifier at the higher risk end.'
Director, Aubrey Capital Management, Edinburgh
‘It is rare that we pick one of our in-house funds but this year is the exception after a stellar period of performance from the Aubrey Global Emerging Markets Opportunities fund.
‘Andrew Dalrymple and his multi-national team focus their attention on the emerging consumer, which following last year’s cyclical rally in emerging markets has, in our opinion, provided the best long term structural opportunity in the region.
‘The fund focuses on rapidly growing sectors where technological or behavioural change is driving prosperity and consumption by targeting companies with high returns on equity, high cash flow return on assets and strong EPS growth. The focus is on Chinese and Indian shares such as Indiabulls Housing Finance, 58.com, Tencent, Alibaba and Godrej Properties. The Aubrey GEM RC1 GBP share class returned 37.3% in the year to 31st October 2017.’
Investment manager, Whitechurch Securities, Bristol
'If you would have said at the start of the year, given the North Korean tensions that our best fund pick of 2017 would have been a fund with a 30% allocation to Korea, and a bias towards cyclicals, I would have been very sceptical!
'However, that is exactly what has happened. Our top pick for the year has been Hermes Asia ex Japan. This is a fund we have held for several years now and it continues to impress.
'Headed up by Jonathan Pines, the fund is managed by a close-knit team of exceptionally talented people, operating a disciplined contrarian investment philosophy. This approach has been executed well in recent years, successfully steering the fund away from the more crowded areas of high-quality equities.
'The fund is a great advert for the benefits of utilising a disciplined, high conviction, active management approach within client portfolios.'
Chartered wealth manager, Raymond James Investment Services, Cardiff
'My selection for best fund is Alquity Asia managed by the experienced fund manager Mike Sell.
'Asia has for many years been synonymous with growth opportunities. This still holds true, but over the last few years most funds have increasingly focused on common names that are effectively global growth proxies and are highly correlated to global equity markets. Companies such as Samsung Electronics, Hyundai Motor or Taiwan Semiconductor are prime examples.
'The Alquity Asia fund focuses on the domestic uncorrelated growth opportunities in the region and is thus as a risk diversifier. There are exceedingly well-managed companies in the Indian and Indonesian retail and construction sectors, or Bangladeshi and Vietnamese banks, that have phenomenal potential, have almost no link to US or UK growth and feature in very few other Asian funds.
'This domestic growth of Asian economies is where investors will likely find strong growth going forwards and that is exactly what The Alquity Asia fund focuses on.'
Research analyst, Cathedral Financial Management, Exeter
'One of our best fund picks of 2017 has been the Man GLG Undervalued Assets fund run by Henry Dixon and Jack Barrat.
'We invested in late 2014 when the fund's deep value strategy was out of favour with the market and the fund was under £180m in size. We were initially attracted to the manager’s attention to detail and the process which seeks to identify companies with undervalued assets and undervalued returns utilising a mix of valuation metrics.
'The fund's turnover is typically a lot higher than the average UK equity fund and this active approach has delivered attractive returns to investors. Year-to-date the fund sits well within the top decile within the UK All Companies sector and the fund is now over £800 million in size.
'Much of the recent surge in performance is simply attributable to the re-rating of a number of the fund's value stocks, as the market has caught on to the opportunity for upside.'
Investment manager, Brooks Macdonald, Guernsey
'It is tricky to pick a favourite as many of our approved funds have had commendable performance year-to-date. A theme we like to reflect in our portfolios and have continued to support is technology.
'On a personal level, as a “millennial”, I have grown up with technology developing at a mind-blowing pace and it continues to fascinate me as an investment theme.
'One fund we use to gain exposure to this theme is the Fidelity Global Technology Fund. The team believe that understanding trends and new innovations are fundamental to identifying long-term leaders in the industry.
'They like to diversify by selecting stocks in growth, cyclical and special situation "buckets". The blend of technology companies that are a mixture of innovative/disruptive, mispriced, or companies with recovery potential, as well as those household names, make it an interesting addition to our portfolios.'
Investment manager, Progeny Asset Management, Leeds
'The Castlefield CFP SDL UK Buffettology Fund managed by Keith Ashworth-Lord has been a fantastic investment for 2017 rising by 20.36% year-to-date and is a real alpha kicker to portfolios. Not only has it delivered strong returns, but compliments and acts as a diversifier within our UK asset allocation. As the name of the fund suggests, Keith is a disciple of Buffett and Graham which means the strategy is proven, easy to follow and monitor.
'Despite the challenges of Brexit, the investment principles continue to shine through as the fund sits in the first quartile in its sector. Having an economic moat is key to the selection of a holding and this gives us confidence the fund can navigate any market conditions.
'The buy and hold strategy is ideal for our client bank as we like to keep things straightforward at Progeny Asset Management and with the fund already winning several industry awards, it is starting to get on the radar of many discretionary fund managers.'