With less than three weeks before the end of the current tax year, many investors will be assessing their portfolios and wondering whether now could be a good time to make some changes. Paul Angell, head of investment research at AJ Bell, has looked at eight funds and investment trusts, covering varying degrees of risk profile, that investors may consider as we head towards a new financial year.
Cautious investors:
TwentyFour Corporate Bond
“Managed by Chris Bowie and the team at TwentyFour Asset Management, this is a risk aware sterling corporate bond fund that could be worth considering for more cautious investors in ISA season. TwentyFour is a specialist fixed income boutique with a large team of investment professionals specialising across multi-sector bonds, investment grade bonds and asset backed securities. The business has impressive expertise across these core capabilities.
“The managers of this fund target superior risk adjusted returns versus peers, and the fund is therefore often cautiously positioned within its peer group. Whilst the shape of the portfolio in recent years has tended to include an underweight to interest rate risk, offset by an overweight to credit risk, the fund has actually been underweight both interest rate and credit risk of late, given the managers’ caution around the tight level of credit spreads.
“Credit spreads have sold off a little in recent months, increasing the fund’s yield to around the 6% mark, with the bulk of the income continuing to come from the relatively high risk-free rate in the UK. Providing no further major pull-backs in credit spreads, the fund should be able to deliver its c.6% yield over the coming 12 months, with potential for additional capital returns should interest rate expectations in the UK fall.”
Personal Assets Trust
“This is a defensively managed multi-asset investment trust where the experienced manager, Sebastian Lyon, puts a high degree of emphasis on capital preservation. The trust is long-only, with concentrated equity holdings and low turnover.
“The manager tends to invest in traditional asset classes (equities, government bonds and gold), and is reactive to market opportunities with his weightings to these core asset classes. Within his equity holding his preference is for higher quality, cash generative businesses. Despite being invested in major, liquid asset classes, the trust still takes on market risk, and there is therefore no guarantee the trust will protect capital over any period. That said, the trust’s long-term performance has been good, delivering a solid return profile with significantly less volatility than wider markets.
“At the time of writing, the trust is defensively positioned, with c.55% of assets held in US and UK government bonds, mostly inflation linked, with c.10% in gold bullion and c.30% in equities. The trust is not typically geared, and a discount control mechanism (DCM) is in place. This DCM keeps the trust’s share price trading close to its NAV.
“The trust typically plays a defensive role in portfolios, holding up when riskier assets, such as equities and credit, sell off. This has been the case through numerous market pull-backs including the financial crisis, the outset of the Covid pandemic and the rising interest rate environment of 2022. For those investors who prefer an open-ended fund structure, the Trojan Fund is managed by the same team and with the same philosophy and approach as the Personal Assets Trust.”
Balanced investors:
M&G Japan
“The fund benefits from an experienced manager in Carl Vine, whose in-depth research approach permeates the strong analyst team assessing Japanese equities at M&G. Vine and the team have curated a universe of companies that have undergone what they term a ‘360-degree evaluation’, with a focus on company, as well as financial analysis. Some of the key factors the team look to understand are how a company generates profits, the sustainability of revenues, and what might impact returns in the future.
“The fund’s manager considers risk management to be equally as important as stock selection. As such, he looks to mitigate against excessive sector over/underweights, with individual stocks additionally assessed based on their correlation with each other. The result is a concentrated portfolio of 40 to 60 stocks that can be invested across the market capitalisation spectrum. The team aren’t wedded to a particular investment style, though we’d expect the portfolio to be fairly core with a value tilt.
“Overall, we believe the fund offers investors access to a strong analyst team who view companies from a differentiated perspective, led by an experienced and considered investor in Carl Vine. The balanced approach to portfolio construction should ensure that stock selection is the main driver of returns and limit some of the volatility historically seen when investing in a particular style in Japan. The fund is also keenly priced with a c.0.5% ongoing charge fee which helps it stand out further within its peer group.”
Polar Capital Global Insurance
“This fund has many of the elements that make for a great specialist fund. A genuine niche in market exposure (non-life insurance businesses), an experienced and specialised team (Nick Martin and Dominic Evans), and the corporate backing of a committed parent (Polar Capital).
“The managers target at least 10% book value growth across the portfolio each year. This growth is made up of the underwriting margins of the invested companies, alongside the market returns from their respective investment portfolios. The expectation is that this book value growth should, over time, lead to an equivalent share price growth, and therefore a doubling of capital returns for the fund every seven to eight years.
“In 2025 two structural tailwinds continue to persist within the insurance industry. Firstly, increased risk complexity (e.g. cyber risk) within the insurance market increasing the premiums charged. Secondly, higher risk-free interest rates boosting the investment yields earned within the investment portfolios of insurance businesses.”
Adventurous investors:
Gresham House UK Smaller Companies
“Gresham House might be less well known in the UK Smaller Companies sector than some of its larger peers but the performance of this fund since its inception in 2019 has started to attract more interest.
“At the helm is Ken Wotton, who has led the fund since its launch in 2019. Wotton’s investment career started over two decades ago as a private equity investor, before he established the public equity markets team that supports this fund in 2009. The team is made up of five investment professionals, with a mix of both public and private market experience, who look to harness their private equity experience within public markets.
“The team’s investment process is derived from their private equity background, and they seek to understand the management teams, business strategy, market positioning and financials of investee companies, before determining a fair value. Their research goes beyond reviewing company reports and meeting company management teams, as they also take advantage of a large network of external contacts who offer in-depth insights into industry specifics that the team may not otherwise know. The resulting portfolio consists of around 40 stocks, with a particular focus on companies with a market capitalisation between £250 million and £1 billion.”
Artemis US Select
“This fund benefits from an extremely experienced lead manager in Cormac Weldon who’s been at the helm since it launched in 2014. Since September 2022, Chris Kent has also operated in a named manager capacity on the fund.
“The managers are style agnostic in their investment approach, assessing the fundamental strengths of businesses. Despite this style agnostic approach, they seek to find businesses which they assess to have a two-to-one risk/reward potential. This often results in the fund displaying a higher growth profile than the index.
“The broader team is made up of six analysts split by sector who travel to the US a number of times a year and who each have around 25 stocks under coverage at any point. The fund has enjoyed a return to form in recent years, with stock selection within the Magnificent Seven stocks being particularly beneficial.”
Income seekers:
Aegon High Yield
“Philosophically, the fund’s co-managers, Thomas Hanson and Mark Benbow, believe passively investing in a high yield index is nonsensical given indices are weighted to the most indebted businesses. The managers are therefore entirely index agnostic in their running of this fund, outside of the sector requirement to be at least 80% invested in high yield bonds.
“Given this index agnostic approach, Aegon’s global team of credit analysts are therefore crucial to the success of the fund, as they help generate the individual bond ideas that populate the portfolio. The fund is also actively managed from a top-down perspective, with the co-managers assessing the fundamentals, valuation, technicals and sentiment of the market. The extent to which they have a positive outlook across these factors then determines the fund’s target beta (0.8 to 1.2).
“The co-managers have been on the fund together since November 2019, through which time they have successfully navigated the Covid pandemic and rising interest rates, delivering outperformance of the market in both up and down markets, as well as top quartile returns within the peer group.”
Man Income
“Man Income is a UK equity fund invested across the market cap spectrum. The fund’s manager Henry Dixon is highly experienced, and his analytical mindset provides a level of pragmatism that allows the fund to navigate through a variety of market conditions. Dixon is also ably supported by a small number of portfolio managers and analysts.
“The team seek out undervalued and unloved companies through identifying two types of stocks – those trading below their replacement cost and those where the market appears to be undervaluing profit streams. Given the focus on generating income, all stocks held must have a yield in line with the market. The manager also has a preference for stocks which have strong potential for dividend growth (exceeding twice the market average) and can hold a small weight in bonds (maximum 20%) that on a relative basis appear more attractive than their company’s equity. In order to avoid value traps the manager additionally focuses on a firm’s cash, cash flow and assets.
“This is a very actively managed UK equity fund, which can diverge significantly from the index and have high levels of turnover. These factors often result in both the fund’s volatility and transaction costs being elevated.”
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