Ten funds have been given places on the FE Invest Approved List as the research team completes its first biannual review of 2019. 
The changes, which will take place on Thursday 25 April, also see three funds removed from team’s buy list.
Eight of the 10 additions are equity funds, with two of these focusing on the UK market. This comes as the FE Invest portfolios lift their exposure to the domestic market.
“The biggest change we can see to the portfolios at this review is that we are positioning the portfolios more towards UK equity and away from international equity, as we believe the UK offers much better value and has priced in a lot of the risks,” the FE Invest team said.
Below, we find out which funds have just been given a place on the FE Invest Approved List and which have been removed.
Performance of fund vs sector and index since launch
Source: FE Analytics
Starting with the IA UK All Companies sector, Liontrust UK Growth has been added to the buy list. FE Invest likes the £360.6m fund, which is run by the FE Alpha Manager duo of Anthony Cross and Julian Fosh, because it has “proven particularly adept” at protecting capital in down markets.
“The managers have a quality focus strategy with a very low turnover approach. The managers favour companies with intellectual capital, distribution channels and repeat business,” the analysts added. “This tends to mean that the fund favours less capital-intensive businesses, with a large cap and growth bias.”
FE Alpha Manager Francis Brooke’s £2.8bn Trojan Income fund is an addition in the IA UK Equity Income sector. Brooke has a preference for sustainable business franchises with low cyclicality and, like all the funds run by Troy Asset Management, makes capital preservation its priority.
Two funds from the equity income peer group have been removed from the list: Royal London UK Equity Income and Standard Life Investments UK Equity Income Unconstrained.
Lindsell Train Global Equity is the only addition to the FE Invest Approved List from the IA Global sector. Headed up by two FE Alpha Managers – Michael Lindsell and Nick Train – the fund has one of the strongest track records of the peer group thanks to its quality-growth bias and rigorous process.
“This fund has a very low turnover, with the management team seeking to buy business franchises and hold them forever. For instance, the last time it sold a holding was in 2015,” FE Invest added.
“It tends to invest in companies that have been around for a long time and likes both family ownership and management teams that are not overly aggressive with their balance sheets.”
Performance of fund vs sector and index since launch
Source: FE Analytics
From the IA Global Emerging Markets sector, JPM Emerging Markets Income has been added to the buy list. Despite its name, the £364.2m fund has a total return approach to emerging markets, aiming to strike a balance between income and capital appreciation.
However, MI Somerset Emerging Markets Dividend Growth has been removed following a bout of underperformance.
Turning to regional strategies, Waverton European Dividend Growth has been added to the Approved List from the European equity space. It has a focus on income but does not target a specific yield, believing this can lead to value traps.
“Instead, the central belief is that successful income investing over long periods is largely dependent on the ability of companies to deliver sustainable earnings growth that can both support and grow their dividends,” the FE Invest team added. “This is not a high-yielding fund but makes up for it with capital growth.”
LF Miton US Opportunities, which is run by Hugh Grieves and FE Alpha Manager Nick Ford, has been added from the IA North America sector. US equities are a challenging area of active managers, but this £607.4m fund has a good long-term track record thanks to its ‘go anywhere’ approach that allows it to hold stocks of any market cap and from any investment style.
Two funds from the IA Japan sector have been added to the Approved List. One is Lindsell Train Japanese Equity; like other Lindsell Train funds, it is based around the idea that durable, cash-generative franchises are not only rare but are undervalued by investors.
This has led to a consistent overweight to consumer staples, healthcare and tech sectors and has served the fund well in recent years as Japan’s ultra-loose monetary policy has led to ‘bond proxy’ stocks performing particularly well. The FE Invest team also noted that this was the only member of its sector to make a positive total return in 2018.
The second IA Japan addition is Man GLG Japan Core Alpha, which is managed by Neil Edwards, Stephen Harker and Jeff Atherton. It’s another fund with a strong long-term approach, this time on the back of a value approach.
“The fund takes a contrarian approach to Japanese equities,” FE Invest explained. “This means it builds a position in a company when its share price is becoming cheaper relative to other Japanese equities and reduces that same position when it gets more expensive. The Japanese companies in the portfolio are typically very large and undervalued by the market.”
Performance of funds vs sector and index over 15yrs
Source: FE Analytics
Moving away from equities and one member of the IA Sterling High Yield sector has won a place on the FE Invest Approved List: Baillie Gifford High Yield Bond.
The analysts like this £657.6m fund, which is run by Robert Baltzer and Lucy Isles, because of its “relatively simple” stock selection process, whereby the managers focus on a company’s resilience and improvements. Unlike some high yield funds, it has a relatively low turnover and is biased towards European, rather than global, bonds.
Finally, the £492.1m Artemis US Absolute Return fund has been given a spot on the buy list. It is headed up by FE Alpha Manager Stephen Moore.
“The fund aims to create alpha from both the short and long book and individual stock selection, and not macro timing,” FE Invest’s analysts said.
“It is macro-aware in portfolio construction and in being net long/short in certain sectors and overall; however, ultimately it is relying on company fundamentals to produce returns. The portfolio is not particularly concentrated so individual stock risk is limited.”