Fundsmith Equity, First State Global Listed Infrastructure and TB Amati UK Smaller Companies are three top-rated funds that a panel of leading financial advisers believe could be appropriate for investors of most ages.
Each of the funds carries a top FE Crown rating of five, is headed up by an FE Alpha Manager and is included in the FE AFI portfolios.
The FE AFI portfolios are constructed by a panel of leading financial advisers in the UK and are targeted at three distinct age groups, based on the assumption that an investor is saving for a pension at age 65.
The FE AFI Aggressive portfolio is aimed at investors in their late 20s, FE AFI Balanced contains funds suitable for an investor in their mid-40s and FE AFI Cautious holds funds more appropriate for those in their late 50s.
However, there are some funds that advisers believe investors of any age can comfortably hold in their portfolio as they appear in all three AFIs. Below FE Trustnet takes a closer look at these top-rated strategies.
First State Global Listed Infrastructure
First on our list is the First State Global Listed Infrastructure fund, which is run by FE Alpha Manager Peter Meany, who established the strategy in 2007, and Andrew Greenup.
The £2bn fund has developed a following among advisers who like the sector’s defensiveness attributed during periods of rising inflation as well as its diversification benefits.
The strategy – which aims to provide income and capital growth – invests in a concentrated portfolio of listed companies including utilities, as well as those focused on highways and railways, marine ports, oil & gas storage and transportation.
However, it does not invest in the underlying infrastructure assets making it more liquid than some other infrastructure-focused strategies.
Performance of fund vs sector & benchmark since launch
Source: FE Analytics
Since launch First State Global Listed Infrastructure has delivered a total return of 164.12 per cent, compared with a gain of 112.96 per cent for the average IA Global peer and a 185.25 per cent return for the FTSE Global Core Infrastructure 50/50 benchmark.
It was among the first thematic funds to be added to the FE Invest Approved List earlier this month – a list of FE Invest’s preferred funds – providing investors with exposure to macroeconomic trends.
“The team looks for growing companies providing essential services that are protected by high barriers to entry,” noted FE Invest analysts. “The team focuses on a company’s financial strength and the management quality.”
Stocks are ranked based on quality and assigned scores related to regulation, leverage, governance and other risks, with a valuation focus.
The FE Invest team praised the fund’s “excellent” performance since launch and the fact that it has generated less risk than generalist global equity funds.
First State Global Listed Infrastructure carries an ongoing charges figure (OCF) of 0.8 per cent and a yield of 2.99 per cent.
Fundsmith Equity
Another fund from the IA Global sector and one which will be familiar to many investors is Fundsmith Equity, overseen by Terry Smith.
Launched in 2010, the £16.9bn fund is popular among advisers and takes a high conviction, long-term approach to investing in stocks that meets its strict criteria.
Veteran investor Smith, who holds FE Alpha Manager status, constructs a concentrated portfolio of 20-30 stocks made up of high-quality businesses able to deliver a 10 per cent return on capital.
Companies typically have advantages that are difficult to replicate, do not require significant leverage, reinvest cash flows at high rate of return and are resilient to change.
Fundsmith Equity’s top holdings include technology giant Microsoft, payment services provider Paypal, tobacco company Philip Morris and soft drinks manufacturer Pepsico.
Performance of fund vs sector & benchmark since launch
Source: FE Analytics
Since launch the fund has generated a 296.7 per cent total return compared with a 141.38 per cent gain for the MSCI World benchmark and a 99.93 per cent return for its average IA Global peer.
“The areas the fund is invested in have been in high demand since the financial crisis, which is why the fund has returned so much in absolute terms,” wrote analysts at FE Invest.
“If this changes and these areas underperform, the outlook for the fund will then depend on how much stockpicking can counteract this.
“In relative terms, the fund remains impressive, only being challenged by a few other funds with similar investment strategies.”
However, the analysts noted Fundsmith Equity’s relatively high OCF, which stands at 1.05 per cent.
TB Amati UK Smaller Companies
The final fund on our list is TB Amati UK Smaller Companies, overseen by Amati co-founder and FE Alpha Manager Paul Jourdan.
The veteran UK small-cap investor is joined on the fund by David Stevenson and Anna Wilson; the portfolio invests in companies outside of the FTSE 100 with a median market capitalisation of £428m.
The management believe that this segment of the market is populated by poorly-researched stocks trading at attractive valuations.
All three managers have to agree on a stock before it is added to the portfolio and are each responsible for researching different industries.
Its small size of £202.2m, noted FE Invest, allows the managers to buy the smallest stocks in their universe and have greater potential for outperformance and are unavailable for their larger peers.
Through the venture capital trust (VCT) operated by Amati Global Investors, the managers also have access to a number of companies listed on the Altenative Investment Market (AIM) before the graduate to the main market.
Performance of fund under Jourdan vs sector & benchmark
Source: FE Analytics
Since Jourdan’s appointment to the strategy in September 2000, the fund has delivered a total return of 585.35 per cent compared, with a gain of 249.02 per cent for the average IA UK Smaller Companies peer and a 180.08 per cent return for the Numis Smaller Companies + AIM (excluding investment companies) index.
TB Amati UK Smaller Companies has an OCF of 0.94 per cent.