Some of the best investment opportunities can be found in emerging markets, the UK, Japan and Europe, according to Bestinvest managing director Jason Hollands, who said that there are several funds worth considering to take advantage of these opportunities. 
“This is no easy task,” said Hollands, “with a number of major stock market indices hovering near to all-time highs, but even within the more pricey markets, funds can be found that seek to target companies that the managers believe are relatively undervalued.”
Looking at the price-to-earnings (P/E) ratio combined with the projected company earnings, Hollands said there were five markets holding discounted opportunities, with the “best opportunities for bargain hunters are to be found in emerging market and UK equities”.
This he attributed to Brexit and the upcoming general election in the UK and ongoing geopolitical uncertainty – particularly the US-China trade war – for emerging markets.
However, at these valuations the markets could offer some attractive opportunities for some fund managers.
“If you think these anxieties are likely to lift to a significant degree over the coming weeks and months, current prices might represent an opportunity for those willing to stick their necks and invest in these out-of-favour markets in the hope that others will follow in due course,” Hollands said.
Below, Hollands (pictured) highlights several funds and managers who should be able to take advantage of lower valuations.
Emerging markets
One of the best ways to tap into undervalued emerging markets whilst mitigating exposure to the US-China trade war is through the Utilico Emerging Markets investment trust, said Hollands.
The £508.6m investment trust invests in infrastructure and utility companies, “areas that are relatively defensive in nature, and it has much lower exposure to China and Hong Kong than most emerging market investments,” according to Hollands.
It looks particularly good value as it is currently trading at a discount to net asset value (NAV) of 10.8 per cent.
Utilico Emerging Markets has made a return of 32.26 per cent over the past five years outperforming the average IT Global Emerging Markets sector peer. It is 3.4 per cent geared, has a yield of 3.28 per cent and has ongoing charges of 1.10 per cent.
Performance of funds over the past 5yrs
Source: FE Analytics
Another closed-ended emerging market fund trading at an appetising discount of 6.1 per cent to NAV is JPMorgan Emerging Markets investment trust.
The four FE fundinfo Crown-rated trust is managed by Austin Forey and might appeal to investors willing to take on more risk given its 33 per cent exposure to Chinese equities.
The £1.2bn trust has made a total return of 74.18 per cent over five years. It is 1 per cent geared and has ongoing charges of 1.02 per cent.
UK
With the UK one of the most unloved markets internationally, funds with a focus on value should do well if there is any progress made on Brexit talks.
As such, two of his favoured fund picks are the £2.9bn Fidelity Special Situations and JO Hambro UK Dynamic, both of which invest across a range of cap sized companies.
The four Crown-rated Fidelity Special Situations fund is overseen by Alpha Manager Alex Wright and is up by 51.08 per cent over the past five years.
Manager Wright has a preference for companies, which have already had a sustained underperformance period but with limited further downside risk. The fund has an ongoing charges figure (OCF) of 0.91 per cent.
Next on the list is the £1.7bn JO Hambro UK Dynamic fund, managed by another Alpha Manager Alex Savvides. The manager believes that investment opportunities come from misunderstanding of corporate change by the stock market, proving to be fruitful for patient, disciplined and unemotional investors.
The fund has made a gain of 45.67 per cent over the past five years, has an OCF of 0.79 per cent and a yield of 3.89 per cent.
Performance of funds over the past 5yrs
Source: FE Analytics
Finally, the Jupiter Income Trust – overseen by veteran fund manager Ben Whitmore – is another value fund, albeit one with a greater blue-chip focus.
The £1.8bn fund made returns of 37.71 per cent, outperforming the FTSE All Share, with an OCF of 0.94 per cent and a yield of 4.40 per cent.
Japan
Beyond the UK and emerging markets, Hollands said another undervalued region is Japan, where he prefers the LF Morant Wright Nippon Yield fund “a fund with a strong value discipline, that invests across the Japanese market”.
Team-managed, the £510m fund has returned 84.50 per cent over the last five years, outperforming both its sector and index. It has a yield of 2.99 per cent and an OCF of 1.15 per cent.
Europe ex UK
Europe also appears on the Bestinvest managing director’s radar currently, with Fidelity European Values his favourite vehicle for value exposure.
“The trust targets companies with growth potential that the manager believes are reasonably priced rather than cheap per se,” he explained.
The £1bn trust managed by Samuel Morse is currently trading at a discount of 6.6 per cent, a fact which Hollands believes may appeal investors looking for that European exposure. It also has six per cent gearing.
Over the past five years, the trust is up by 76.60 per cent, also outperforming both its sectors and index.
Performance of fund versus sector and index over the past 5yrs
Source: FE Analytics
The trust has an OCF of 0.41 per cent and has a yield of 3.49 per cent.
US
The final ‘cheap’ market, and not one known for its undervalued opportunities currently, identified by Hollands is the US.
“Of course, no trend lasts forever and so it might be time for investors to consider shifting some of their US exposure out of popular S&P 500 index trackers – which are now 22 per cent exposed to technology stocks – into investments that have characteristics that are more defensive,” said Hollands.
One option to consider he said is the Invesco RAFI US 1000 UCITS ETF, which provides exposure to the 1,000 largest US companies.
However, instead of weighting them on market capitalisation basis like traditional trackers it is weighted on the basis of four fundamental factors measuring sales, cash flow, book value and dividends.
The exchange-traded fund has made returns of 77.67 per cent over the past five years and has an OCF of 0.39 per cent.