Money: Visit the world's growth hotspots
Three experts recommend `must have' funds for the new investor. Harvey Jones reports
Sunday 19 September 1999
For the long-term investor, five good holdings are a strong start. Begin with a fund that suits your investment aims and then build a collection of must-haves.But a warning: as with anything else, investment has fashionable and unfashionable funds and sectors. What's hot now may be tepid in three years. Keep an eye on performance.
We asked three investment experts - an independent financial adviser, a stock broker and an investment researcher - to name their favourites for long-term growth. Philippa Gee, of Gee & Co, a Shrewsbury-based IFA, says: before picking funds check carefully the sectors they invest in. "There's no point backing five solid bets with big fund managers if they're all in UK larger companies. You must achieve diversity and balance. Each should have different objectives."
She would start with a UK larger-companies fund, Jupiter UK Growth. "This is a large, actively managed fund, more aggressive than many, with good long-term performance and consistent returns." Next she would widen her coverage with Jupiter's UK Smaller Companies fund, before turning her attention to Europe with Gartmore European Selected Opportunities fund. "This is quite high risk, a large fund with good past performance. It's given consistent returns even where markets have been volatile. It's backed up with good management and research, which is essential."
She'd add a more cautious fixed-interest corporate bond fund. Such a bond is a loan to a firm in return for a fixed rate of interest and a pledge to repay capital on a set date. They're more secure than unit trusts, particularly in a fund made up of a variety of different bonds. Her favourite is Aberdeen Prolific Fixed Interest fund. "It pays income quarterly, which can be reinvested into the fund to provide growth."
For her fifth and last fund she'd want overseas exposure. Key markets are North America, Japan and South-east Asia: she'd access these via a single fund management house. "I'd look at funds from Fidelity, and split my holding into three."
When choosing must-have funds for long-term growth she advises considering big names with established performance and reasonable charges. Avoid funds that rely on a single fund manager for their success, as he or she may suddenly leave, making the future uncertain.
A fund with a recent, explosive performance should be scrutinised carefully to see if it's sustained over a longer period.
Brian Tora, the head of asset management at stockbrokers Greig Middleton, picks out what he calls a "quality portfolio, not punting, but looking at big holdings". He starts with the Baring UK Growth fund - "a good team, a good long-term track record and low volatility". A North American fund is essential, he says. He suggests Mercury American - "it has a blue- chip portfolio and, though it came off the boil a bit recently, this actually makes it a good time to buy."
For Europe he advises Gartmore European Selected Opportunities. "It has diversification across medium and larger companies and a strong portfolio that is relatively low risk." To cover Asia, he suggests Schroder Tokyo fund, sharing the general mood that Japan's economy has finally turned around and is now set for growth.
Finally, Mr Tora recommends an investment trust. These differ from unit trusts in that they are set up like companies, with shares traded on the stock market and their price driven by supply and demand. The value of an investment trust depends on the value of the underlying investments in the fund. "I'd recommend Fidelity Special Values investment trust. I like it primarily as it is run by Anthony Bolton, the grand old man of British fund management," he says.
When demand for investment trust shares is weak, the price of an investment trust can languish and a "discount" opens between the value of the fund and the market value of the shares in the fund. Many investment trusts currently have a large discount but these are expected to narrow over the next few months. The Fidelity fund currently runs a 16 per cent discount. "So you're buying it on the cheap," Mr Tora says.
Martyn Page, investment researcher at Countrywide, the financial advice network , starts his portfolio with the ABN Amro UK Growth fund, primarily as its fund manager is "an excellent custodian of assets". He picks the Jupiter Financial Opportunities fund, which invests in banks, insurers and asset management groups, praising the financial analyst behind the fund for allocating its holdings intelligently.
For mid-cap FT-SE 250 and smaller companies, he he advises the Johnson Fry Slater Growth fund, which invests in a wide range of companies - "the equivalent of a private portfolio."
Next on his list is the Legal & General UK All-Share tracker fund: "I think these low-cost tracker funds are wonderful, and this has some of the lowest charges of all."
His final choice covers the US market - the Credit Suisse Transatlantic fund. "The fund manager has an eye for making money," Mr Page says.
Our experts show little agreement. With hundreds of funds available it shouldn't really be a surprise that few appear more than once. But our panel took a broadly similar approach, taking a couple of funds in UK smaller and larger companies, as well as a European, North American and Asian funds. For longer-term investment, diversification is clearly the order of the day.
n Contacts: Aberdeen, 0345 886 6666; ABN Amro, 0171-678 4521; Baring, 0171-214 1900; Credit Suisse, 0171-426 2318; Fidelity, 0800 414181; Gartmore, 0800 289336; Johnson Fry, 0171-451 1236; Jupiter, 0171-412 0703; Legal & General, 01222 448412; Schroder, 0800 526535.
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