Funds with a focus on Indian equities, tech stocks and the world’s second largest economy are potential options for investors looking to add satellite funds to their portfolios this ISA season.
Having looked at some core funds for this ISA season, FundCalibre managing director Darius McDermott now considers what satellite funds could help build that portfolio further.
“Once the core is established, investors can then add some satellite investments to their portfolios,” he explained. “There is no hard and fast rule: these satellite funds could be added to provide extra income, extra diversification or extra growth.”
Below, McDermott offers three potential satellite funds that could improve the return of the portfolio, if at a higher risk/return rate.
Goldman Sachs India Equity Portfolio
First up is the $1.9bn Goldman Sachs India Equity fund, managed by Hiren Dasani – who McDermott described as a “patient investor”.
McDermott noted India has been tipped by the International Monetary Fund to be the fastest growing economy in 2019, adding: “India’s economy has been picking up thanks to the implementation of recent pro-business policies and the momentum has made it an attractive alternative for investors.”
Performance of fund vs sector and index since launch
Source: FE Analytics
Goldman Sachs India Equity has a bottom-up approach and the portfolio has a bias towards growth companies. That said, Dasani prefers companies that are trading at substantial discounts to their intrinsic value, making valuation is an important part of his process.
“Dasani has a very long-term time horizon and a very low portfolio turnover,” McDermott said. “He is a patient investor and the fund can weather day-to-day volatility to tap into significant growth opportunities.”
Since launch in March 2008, the fund has posted a 230.02 per cent total return and – as the chart above shows – outperformed its MSCI India IMI benchmark by around 120 percentage points.
The portfolio’s biggest sector weightings at present are financials (at 25.3 per cent), information technology (16.6 per cent) and consumer discretionary (14.4 per cent), while it is underweight large-caps and overweight small- and mid-caps. Top holdings include Infosys, Axis Bank and Maruti Suzuki India.
Goldman Sachs India Equity Portfolio has ongoing charges figure (OCF) of 1.05 per cent.
AXA Framlington Global Technology
McDermott’s next satellite pick moves away from India to the global technology world: Jeremy Gleeson’s £634.5m AXA Framlington Global Technology fund.
Gleeson joined the fund in 2007 having been a specialist in tech stocks since 1998. Prior to joining AXA Investment Managers, he was a senior portfolio manager on the technology desk at Close Investments.
Performance of fund vs sector and index under Gleeson
Source: FE Analytics
The unconstrained multi-cap fund has a focus on new technology with viable commercial activity, with each of the fund's holdings being tied to at least one theme that Gleeson expects to drive future growth in the technology sector.
“Gleeson believes individual stock picking ultimately drives portfolio construction. Jeremy looks for companies with progressive-thinking management, dominant positions, above-market growth and sustainable or improving profitability,” McDermott said.
Given its tech specialisation, the bulk of the portfolio is held in US names (87.42 per cent) although there is 6.76 per cent in emerging market stocks, while the biggest sector exposures are to software, semiconductors and interactive media. Google owner Alphabet, Apple and Cisco are its largest individual holdings.
Under Gleeson, the fund has made a 453.28 per cent total return, beating its benchmark and ranking it first out of the 10 members of the IA Technology & Telecommunications sector.
AXA Framlington Global Technology has an ongoing charge fee of 0.82 per cent.
Fidelity China Special Situations
McDermott’s final pick is the Fidelity China Special Situations investment trust and he favours this offering because, as with the Goldman Sachs India Equity Portfolio, it focuses on a fast-growing developing market.
Managed by Dale Nicholls since 2014, the £1.3bn trust invests in companies listed both domestically in China and on the Hong Kong Stock Exchange. The portfolio’s main sector exposures are consumer discretionary, communication services, IT and financials, with Tencent, Alibaba and China Pacific Insurance being the largest holdings.
McDermott said: “Dale has a bias towards small and medium-sized companies and makes full use of Fidelity's investment licences in China to offer investors direct exposure to the China growth story. While the country's economy has been slowing in recent years, it is still likely to be the second fastest growing this year, behind only India.”
Performance of trust vs sector and index under Nicholls
Source: FE Analytics
Since Nicholls took over the trust in April 2014, Fidelity China Special Situations has made a 126.62 per cent total return. This is some 20 percentage points above its average IT Country Specialists: Asia Pacific peer and ranks it third out of eight trusts in the sector.
The trust is domiciled in London but the investment team is based in Asia. Nicholls said: “Being on-the-ground in China allows us to cut through the noise and invest in some of the world’s most innovative and fast-growing companies.”
Fidelity China Special Situations has ongoing charges of 1.11 per cent, is trading on a 9.9 discount to net asset value and is yielding 1.6 per cent.