Investing in funds with a narrow regional or sector focus, although often more volatile, is a good way for an investor to add a shot of growth into their portfolio if they have a strong conviction about a particular area of the market.
With this in mind, FE Trustnet asked the experts for their favourite niche areas of the market and the funds they would choose to access them.
Financials
Invesco Perpetual Global Financial Capital
Financial stocks were the decisive winners of 2012 and many experts believe the sector has room to grow as banks and other financial institutions repair their balance sheets.Andy Parsons (pictured), head of investment research at The Share Centre, says that although it may not be everybody’s cup of tea, Invesco Perpetual Global Financial Capital has the potential to post stellar returns.
"I like Paul Read and Paul Causer’s Invesco Perpetual Global Financial Capital fund," he said.
| Name | Invesco Perpetual Global Financial Capital |
|---|---|
| Fund Size | £36.9m |
| Min. Investment | £500 |
| TER | 1.57% |
| Yield | 6.88 per cent |
| Manager | Paul Causer, Paul Read and Nick Mustoe |
| FE Crown Rating | N/A |
Source: FE Analytics
"The fund is debt-backed, but does have exposure to equities as well. With a fund like this, you either love it or you hate it and it boils down to your view on financials. However, it currently has a nice yield of 6.9 per cent."
"Obviously, there are no guarantees with this fund, but investors could be well rewarded."
"More opportunities are appearing as the financial sector has been readjusting itself and with a good, strong management team of Causer and Read, investors could do quite well out of it."
"However, I must stress that the reason I like this fund is because of its global mandate," Parsons added.
Invesco Perpetual Global Financial Capital was launched in January last year and is up 45.26 per cent since then.
The fund sits in the Specialist sector and has no specific benchmark, but as a point of reference the FTSE World General Financials index has returned 31.87 per cent over the same period.
Performance of fund since launch vs index
Source: FE Analytics
The fund holds more than 80 per cent of its £36.9m assets under management (AUM) in banks and the rest in insurance companies.
India
Jupiter India
Even though India has a higher rate of growth than much of the developed world, it is a difficult market to outperform. However, Parsons says this fund is a good choice for investors who want exposure to it.
| Name | Jupiter India |
|---|---|
| Fund Size | £250m |
| Min. Investment | £500 |
| TER | 1.88 per cent |
| Manager | Avinash Vazirani |
| FE Crown Rating | 4 Crowns |
Source: FE Analytics
"What I like about this, even though there are some much broader global emerging market funds with exposure to India – and they are very good – is that through the Jupiter fund you are getting direct exposure to a very exciting area of the market," Parsons said.
"There is so much opportunity in India, but it is only a compelling investment if you take a three- to five-year view."
His thoughts are echoed by Brain Dennehy, managing director at Dennehy Weller.
"The Indian stock market has turned a very important corner. The reward for greater clarity over much-needed reforms should set India on the path of a very long-term recovery," Dennehy said.
"There is almost no demand for India funds from UK investors, despite it being more than twice the size of the EU population (including the UK) and with extraordinary potential."
Jupiter India has been managed by Avinash Vazirani since its launch in February 2008.
Performance of fund vs index since February 2008
Source: FE Analytics
Over that time it has returned 39.74 per cent while its benchmark – the MSCI India index – has made just 7.48 per cent.
Agriculture
Sarasin AgriSar
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, says that the growth of the global population means investing in food producers could deliver lofty returns.
"One theme that has been discussed and debated is agriculture," he explained.
"As the globe sees more intense urbanisation, along with growing wealth of the emerging markets and the general growth of the population, there is the debate on how we will feed ourselves in the future."
"Obviously by investing in this theme you need a long-term mindset; probably 20 to 30 years. The fund I would choose for this is Sarasin AgriSar."
| Name | Sarasin AgriSar |
|---|---|
| Fund Size | £166.6m |
| Min. Investment | £1,000 |
| TER | 1.74% |
| Yield | 0.9% |
| Manager | Henry Boucher & Mark Whitehead |
| FE Crown Rating | 2 Crowns |
Source: FE Analytics
The £166.6m Sarasin AgriSar fund has been managed by Henry Boucher since its launch in April 2008. Boucher was joined by Mark Whitehead a few months later.
Over that time, the fund has returned 25.06 per cent, compared with 34.56 per cent from its MSCI World benchmark.
Performance of fund vs index since April 2008
Source: FE Analytics
The fund says it aims to achieve capital appreciation through investing in the long-term trends within the global food and agricultural industry.
Its largest regional weighting is to Europe, which makes up 29.3 per cent of the portfolio.
Gold
Smith & Williamson Global Gold & Resources
"Gold is another area of the market that investors may want exposure to," Lowcock added.
"Historically, gold shares would track the gold price. However, with the development of ETFs, investors now use them to get direct exposure."
"This drove up the gold price but resulted in a drop in the demand for gold companies – and they started acting like any other equity."
"However in order to re-correlate the gold price and gold mining shares, companies have started to offer dividends that are linked to the underlying gold price."
"It is very early days; however as a niche play I would go for Smith & Williamson Global Gold & Resources because it has a bias towards smaller mining companies," he said.
Smith & Williamson Global Gold & Resources was launched in 2004. The current managers Robert Lyon and Ani Markova joined the fund in 2008 and 2010 respectively.
| Name | Smith & Williamson Global Gold & Resources |
|---|---|
| Fund Size | £70.4m |
| Min. Investment | £1,000 |
| TER | 1.85 per cent |
| Manager | Robert Lyon & Ani Markova |
| FE Crown Rating | 4 Crowns |
Source: FE Analytics
The £70.4m fund has 69.8 per cent in gold mining shares and 27.9 per cent in other precious metal shares, such as platinum, silver and diamonds.
Like most other gold-focused funds, it has struggled recently. Over three years, Smith & Williamson Global Gold & Resources has returned 2.66 per cent while the S&P GSCI Gold index has returned 48.7 per cent.
Performance of fund vs index over 3yrs
Source: FE Analytics
Technology
AXA Framlington Global Technology
Juliet Schooling-Latter (pictured), head of research at Chelsea Financial Services, thinks that technology will continue to be a strong growth area.
"I think we have largely overlooked past the horrors of the early 2000s with the dotcom bubble. Now I think it is a massive growth area, as online shopping is now picking up and the popularity of smartphones continues to grow.""A fund we like for exposure to technology is AXA Framlington Global Technology."
The £195.2m fund has been managed by Jeremy Gleeson since July 2007.
Over five years, it has returned 99.57 per cent. This beats both the IMA Technology and Telecoms sector and the MSCI IT index, which returned 73.71 per cent and 57.94 per cent, respectively, over the same period.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
That makes AXA Framlington Global Technology the best-performing fund in the sector over the period.
| Name | AXA Framlington Global Technology |
|---|---|
| Fund Size | £195.2m |
| Min. Investment | £1,000 |
| TER | 1.62 per cent |
| Manager | Jeremy Gleeson |
| FE Crown Rating | 4 Crown |
Source: FE Analytics