Four potential investment stars of tomorrow
Four potential stars of tomorrow
Cost denotes the annual ongoing charges figure for the share class of the fund that is typically bought by retail investors via platforms. Financial Express (FE) risk scores show how risky each fund is in comparison with the FTSE 100 index of the UK’s leading companies, which has a risk rating of 100. Funds that are more volatile than the FTSE 100 have a score above 100 and vice versa, giving a reliable indication of relative risk.
Crux European Special Situations cost: 0.84% FE risk score: 78
The fund’s index-beating performance in both up and down markets is impressive. Trustnet data shows that the fund performed well when European markets plummeted in 2011 and when they rebounded in 2012. Rob Morgan, at Charles Stanley Direct, rates the fund’s manager, Richard Pease (pictured above), as a “notable rarity” in this regard.
Over a 25-year career Mr Pease has outperformed his benchmark by an average 0.41% a month, according to Tilney Bestinvest, which publishes data on career track records and identifies Mr Pease as one of today’s top 100 fund managers.
Ardevora UK Equity cost 1.16% FE risk score: 92
Jeremy Lang (pictured above) and William Pattisson co-founded Ardevora Asset Management at the start of 2010 and have all of their long-term savings in the Ardevora funds. “Managers who set off on their own and establish their own investment boutiques are often highly incentivised to perform well,” says Hargreaves Lansdown’s Heather Ferguson.
The UK mid-cap fund focuses on cyclical companies and tends to perform well when times are good; it generally does less well in falling markets.
Scottish Mortgage Investment Trust cost: 0.48% FE risk score: 134
Many good-quality active managers take a highly focused approach. Baillie Gifford’s James Anderson (pictured above) and Tom Slater, co-managers of Scottish Mortgage Investment Trust, take a highly selective long-term view of the prospects of companies and completely disregard the constituents of any benchmark or what their peers are holding.
The trust has an active share of 94%.“They’ve been highly successful in picking some winners from an early stage, such as Tencent Holdings,Tesla Motors and Facebook,” says Mr Morgan.
“The trust’s performance can behave completely differently to the wider market, but this means it can work well as part of a diverse portfolio.”
Kames Investment Grade Bond cost: 0.79% FE risk score: 20
This fund has outperformed the IA Sterling Corporate Bond peer group in every discrete period over the past five years,accordingtoTrustnet.Co-managed by Stephen Snowden and Euan McNeil (pictured above), it is holds an ‘elite’ rating from FundCalibre.
“Both managers are really experienced and opinionated,” says FundCalibre’s Darius McDermott.“They make money by exploiting changes in the credit worthiness of companies in the global investment- grade market and changes in expectations of the path of interest rates. They also have the flexibility to react quickly to changing market conditions.”
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
Corporate bonds are one of the main ways companies can raise money (the other is by issuing shares) by borrowing from the markets at a fixed rate of interest (the reason why they are also known as “fixed-interest securities”), which is called the “coupon”, paid twice yearly. But the nominal value of the bond – usually £100 – can fluctuate depending on the fortunes of the company and also the economy. However it will repay the original amount on maturity.
A standard by which something is measured, usually the performance of investment funds against a specified index, such as the FTSE All-Share. Active fund managers look to outperform their benchmark index. Cautious fund managers aim to hold roughly the same proportion of each constituent as the benchmark, while a manager who deviates away from investing in the benchmark index’s constituents has a better chance of outperforming (or underperforming) the index.