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What's in your ISA? We ask five readers

With the new financial year up and running, we ask five readers where they believe the best opportunities for savers could lie in 2014.

What's in your ISA

Equity markets continue to go from strength to strength, while there is still plenty of concern around bonds. Meanwhile some are tipping a recovery in emerging markets, while others are questioning whether the 'Abenomics'-inspired Japan surge has run its course.

So with the new financial year up and running, we ask five readers where they believe the best potential rewards could be for savers in 2014.

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Andrew Stansfield, branch manager, Charles Stanley, Cardiff

‘While there are a number of funds we prefer, it is essential each client has a fund specific to their particular risk and return objectives.

‘One asset class we feel positive about is UK commercial property because it produces a long-term attractive yield and has delivered historically low volatility and a solid predictable income.

‘Property is an uncorrelated asset class that holds its own in a diversified portfolio. The sector is not looking particularly cheap or expensive at the moment, although pockets of value exist in some sectors but the yield gap between commercial property and government and corporate bonds is attractive.

‘Two funds that look interesting to us are Swip’s Property Trust, run by Gerry Ferguson, and the Threadneedle UK Property Trust, run by Don Jordison.’

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Simon Brett, CIO, Parmenion, Bristol

‘The world population is growing, from seven billion today to an estimated 10.5 billion by 2050 according to the UN. Feeding this market provides investment opportunities from the tractor and fertiliser manufacturers who sell to the farmers, the transport companies that moves the goods, to the end retailers that sell the food. All derive some or all of their earnings from the production of agricultural commodities. The Baring Global Agriculture fund invests in companies from the “field to the fork” using their growth at a reasonable price investment methodology. Its global remit means the fund will find plenty of opportunities to invest in what remains an exciting growth market.’

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Mark Arkwright, director, Gore Browne IM, Harrogate

‘There is an old stock market adage “listen to what the market is telling you”.

‘At the moment it is saying it does not want to go down, and we agree that equities remain the asset class of choice.

‘Of course, none of us know what uncertainties ISA investors will face in the long run – but we can be sure there will be a reduction in monetary stimulus and that inflation is likely to remain low.

‘Under these conditions, it makes sense to stick with companies that have strong balance sheets, good cashflow and improving dividends. We like Perpetual Income & Growth and Trojan Income for this type of exposure. For more cautious ISA clients, CF Miton MultiCap/Diverse Income uses put options. We continue to like infrastructure funds and are buying HICL and Assura Group, which aims for capital growth and rising rental income from a portfolio of primary health care properties.’

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Phillip Wong, stockbroker, Redmayne-Bentley, Leeds

‘The Standard Life Global Smaller Companies fund, run by Harry Nimmo, aims to provide long-term growth by investing predominantly in the shares of smaller companies listed on the global stock markets. It typically holds a concentrated portfolio of stocks and is actively managed by Nimmo and his team.

‘In terms of performance, in the year to 31 December 2013, the fund increased by 38.7%, with the IMA Global benchmark rising by 21.7%. The largest regional allocation comes from the US, and the portfolio is well diversified across 55 holdings.

‘With the global economy on the mend, global smaller companies look well positioned to enhance their earnings growth, and we take comfort in the investment philosophy of investing in quality companies that have sustainable growth.’

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Jason Hollands, managing director, Bestinvest, London

‘We feel it is a time to be a little more cautious on equities. Developed equity markets enjoyed an exceptionally strong run last year, supercharged by the tailwinds of quantitative easing (QE). Today, valuations are looking a little stretched, especially in the US.

‘While emerging markets (EM) look cheap it may be too early to pile back in with gusto: China’s economy is decelerating markedly. The wind-down of QE has seen a hike in the cost of capital for EM. Their currencies have been pummelled and the crisis in Crimea is a stark reminder of the risks of investing in these regions.

So, while funds like Lazard Emerging Markets offer great long-term potential, in the near term there is better value and stability in European equities. Lack of moderate inflation in the eurozone means a very real chance of new stimulus measures being introduced by the European Central Bank. Investors who have capacity to add to their equity exposure might consider European equity funds for their ISAs. We are using funds such as Baring Europe Select Trust run by Nicholas Williams and the Henderson European Focus fund, run by John Bennett.

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