Active funds have the potential to perform better than index trackers, but there is the risk that the fund manager may make the wrong decision.
Many investors build a core of low-cost passive funds and then add active funds as ‘satellites’ around this to try to add value. See our 50 first funds for beginners homepage for links to the other 30 funds in the list.
UK STOCK MARKET INCOME
Franklin UK Rising Dividends W Acc
This fund aims to beat the FTSE All-Share index over the long term by investing in businesses that can consistently grow their dividends. The fund has a concentrated portfolio, typically of 40 to 50 names and focuses on firms that have increased their dividends in at least eight of the past 10 years and have not cut their dividends over that period.
ISIN – Inc: GB00BT6STC53
MI Chelverton UK Equity Income B Inc or Acc
By investing in predominantly medium-sized companies, it aims to deliver a high and growing quarterly dividend and the prospect of good long-term capital growth. It has been a standout performer over the long term, but can be more volatile than other equity income funds.
ISIN – GB00B1FD6467
UK STOCK MARKET GROWTH
Merian UK Mid Cap R Inc or Acc
Formerly called Old Mutual, its aim is to provide capital growth by investing primarily in a portfolio of medium-sized UK companies.
ISIN – Inc: GB00B8FC6L92
TB Amati UK Smaller Companies B
This diversified smaller companies fund aims to provide a ‘fund for all seasons’ by favouring companies it can back over the long term. The portfolio is around 70 companies that have a track record of success, a lot of intellectual property and an ability to commercialise it. The fund maintains a cash buffer of 10% to fund redemptions and invests one-fifth of assets in companies worth more than £1.4 billion to counter liquidity issues with investing in smaller companies.
ISIN – Acc: GB00B2NG4R39
Liontrust Special Situations I Inc
An attractive offering for investors seeking an unconstrained UK equity fund, this fund has a distinct process looking for UK companies with a strong defendable business franchise. It invests in all sizes of companies in a relatively concentrated portfolio with low turnover. Acc class is not available.
ISIN – GB00B57H4F11
GLOBAL STOCK MARKET
Fundsmith Equity I Inc or Acc
Managed by Terry Smith, it invests in equities on a global basis for the long term. It will not adopt short-term trading strategies.
ISIN – Inc: GB00B4MR8G82
Lindsell Train Global Equity B Inc
Managers Nick Train, Michael Lindsell and James Bullock want to achieve long-term income and capital growth by constructing a concentrated portfolio of 20 to 35 ‘exceptional’ companies from around the world. Acc class is not available.
ISIN – B Inc: IE00B3NS4D25
Artemis Global Income I Inc or Acc
The fund is better diversified than some global equity income funds, using its full global remit to exploit income opportunities and keeping its UK content relatively low.
ISIN – Inc: GB00B5N99561
SPECIALIST OVERSEAS SHARES
M&G North American Dividend I
This fund’s steady performance makes it well suited to equity investors looking for a relatively smooth ride. Unlike many other funds in this asset group, it is not chock-full of the FAANGS (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) that have driven the US market higher. It usually holds 40 to 50 stocks, of which more than half are in mega-caps.
ISIN – Acc: GB00B7565G26
Man GLG Continental European Growth C Professional Acc
This fund aims to achieve above average long-term capital growth through investing in shares of companies listed on European Stock Exchanges. The manager invests in companies that enjoy a firm leadership position that gives them excellent prospects, plus companies that are emerging winners already enjoying clear competitive advantages. Inc class is not available.
ISIN - Acc: GB00B0119487
Baillie Gifford Japanese Inc or Acc
Japan is a major developed market, and this is a sound choice for getting core Japanese equity exposure into your portfolio. The fund seeks to identify typically 50 to 60 companies with potential to grow over the long term. It is managed by a very experienced Japanese equities team and has a low ongoing charge, compared to rival funds.
ISIN - Inc: GB0006010945
Stewart Investors Asia Pacific Leaders B Inc or Acc
Its goal is to achieve long-term capital growth from a portfolio of large and medium-sized companies in the Asia Pacific region (excluding Japan, but including Australasia).
ISIN – Inc: GB00B57S0V20
Baillie Gifford Emerging Markets Growth B Inc or Acc
This fund’s objective is to produce attractive returns over the long term through investment in emerging markets worldwide. China is the largest weighting at almost 30% followed by India, South Korea and Brazil. It was a winner in the Moneywise Fund Awards 2018.
ISIN – Inc: GB0006020530
GAM Star Credit Opportunities GBP Inst
Aims to provide investors with a high income, paid annually, from high-quality bonds. Lends to investment-grade companies, ideally for 10 years or more. A strong yield of 4.2% in 2019.
ISIN – Inc: IE00B54L8Q54
Jupiter Strategic Bond I Inc or Acc
A flexible ‘go-anywhere’ bond fund that aims for a high income and capital growth by seeking out the best fixed-income opportunities around the world.
ISIN – Inc: GB00B544HM32
Royal London Global Bond Opportunities Z Inc or Acc
This well-diversified fund offers a high level of income as well as the opportunity for capital growth. It focuses predominantly on credit markets internationally.
ISIN – Inc: IE00BYTYX230
Marlborough Global Bond P Inc or Acc
A very diversified portfolio of bonds from around the world, including the UK. A good way to diversify bond exposure. It has almost 500 holdings – more than most comparable funds.
ISIN – Inc: GB00B8H7D001
ETHICAL AND SOCIALLY RESPONSIBLE INVESTMENT
Royal London Sustainable World Trust C Inc or Acc
The core aim of this fund is to invest in innovative companies having a positive impact on society. It also invests in companies showing leadership in environmental, social and governance (ESG) management. There tends to be a bias towards the US and developed markets because that is where the manager tends to find innovation and companies with the strongest ESG standards.
ISIN – Inc: GB00B8GG6326
Rathbone Ethical Bond
It has a higher income target than other bond funds and has a very good performance record. The fund excludes investments in companies that are involved with: mining, arms, gambling, pornography, animal testing, nuclear power, alcohol or tobacco. All its investments must have at least one positive environmental, social or corporate governance quality.
ISIN – Inc: GB00B7FQJT36
Schroder Global Cities Real Estate Z
This fund focuses on the property prospects of strong global cities. It invests in real estate investment trusts and the shares of real estate companies worldwide. It aims to deliver 3% above UK inflation over three to five years. The lion’s share of assets is in the US (56% at the end of 2019), followed by Japan (11%).
ISIN – Inc: GB00B1VPTW51
HOW TO TURN THE FIRST 50 FUNDS INTO A POTENT PORTFOLIO
When putting together a portfolio of funds, the easiest way to think about combining these is through the ‘core and satellite’ approach. This separates a portfolio of investments into two distinct segments: the first is a core of long-term, low-cost and highly diversified investments, while the other is a selection of more specialist satellite investments.
Moneywise has put together some simple portfolios, that will help you begin investing for income or for growth. You can view them here.