Legg Mason IF Japan Equity, Jupiter India and Man GLG Continental European Growth are the three funds that The Share Centre’s Andy Parsons is tipping to succeed in 2018. 
The head of investments and co-manager of The Share Centre multi manager fund-of-fund portfolios said he is looking to funds that are capable of weathering storms and benefitting from turbulence as 2018 looks set to be another uncertain year.
“After another tumultuous geo-politically charged year, 2018 is likely to be much of the same, where answers are sought to some of the most politically challenging questions and experts look to central banks for guidance and indications as to the health of the global framework,” he said.
“Brexit will remain at the forefront of everything UK related, albeit closely followed by the Bank of England’s interest rates decisions.”
Meanwhile, over in the US, potential sweeping tax reforms could provide a boost to markets while the Federal Reserve will likely maintain its upward trajectory with interest rates, Parsons (pictured) said.
“Elsewhere in the world, much of the focus in Europe will remain on Germany and Italy as they look to sort out their respective political leaderships,” he added.
With such uncertainty surrounding these parts of the world, it is unsurprising that below the manager tips three funds in areas he believes have fewer challenges ahead in 2018.
Jupiter India
First up is FE Alpha Manager Avinash Vazirani’s £1bn Jupiter India fund, which should benefit from improving fundamentals in the country.
“A number of factors are converging that have been giving India prominence on the global economic stage,” Parsons said.
“This includes high growth rates in the industrial and service sectors, significant population growth, strong domestic demand, as well as a government that is pro-business. This mix, in our eyes, subsequently makes the country hard to be ignored as a long-term investment opportunity.”
On an absolute return basis the five FE Crown-rated fund made a good return of 22.21 per cent in 2017, though it was the second worst performer of all Indian equity funds listed on FE Analytics and underperformed the MSCI India benchmark by 3.45 percentage points.
The portfolio has been better over the longer term however, returning 212.99 per cent since its launch in 2008 – 129.64 percentage points higher than the benchmark.
Performance of fund vs benchmark since launch
Source: FE Analytics
“The investment approach for this fund is to identify companies based on the strengths of their fundamentals and Vazirani principally uses a process referred to as a GARP measure [growth at a reasonable price],” Parsons said.
“However, if an opportunity exists, he will be prepared to pay a premium if the earnings growth compensates for this. Investors should recognise that investments will be made across the capitalisation scale.”
Indeed, the fund is 59.5 per cent invested in large caps with 24.2 per cent in mid caps and 7.2 in smaller companies.
Jupiter India has an ongoing charges figure (OCF) of 1.09 per cent.
Legg Mason IF Japan Equity
Up next is the five FE Crown-rated Legg Mason IF Japan Equity fund run by Hideo Shiozumi, though it is not for the faint-hearted.
The fund has been the best performer in the IA Japan sector over the last decade (450.4 per cent) but has also been the most volatile (23.55 per cent).
Performance of fund vs sector and benchmark over 10yrs
Source: FE Analytics
“Japan remains one of our preferred regions and this particular fund seeks to benefit from the economic, demographic and structural changes that the country is continuing to face into,” Parsons said.
“The portfolio will vary between 25-60 stocks, with the lower the number clearly indicating the strength and conviction the manager has in those companies.”
Around 80 per cent of the £852m portfolio are seen by Shiozumi as core long-term holdings, whilst the remaining 20 per cent will be used for more short- to medium-term tactical investments.
“The fund has the flexibility to invest across the entire market cap spectrum albeit generally focuses on those between £330m and £1bn,” Parsons added.
“Investors should be prepared to accept a higher degree of volatility with this fund, but for those seeking the potential for strong growth, this fund may well be suitable for 2018.”
Legg Mason IF Japan Equity has an OCF of 1.02 per cent.
Man GLG Continental European Growth
Having been tipped by The Share Centre for 2017, Rory Powe’s five crown-rated Man GLG Continental European Growth reappears as the third of Parsons’ selections for 2018.
The £1.1bn fund had a strong year in 2017, returning 18.74 per cent compared to its sector average of 17.29 per cent, as the below chart shows.
Performance of fund vs sector and benchmark in 2017
Source: FE Analytics
Parsons noted: “It’s tried and tested formula has proven to be invaluable over the last 12 months. More importantly, this momentum looks set to continue.”
“This is a fund for investors looking for a core portfolio of European equities, who want to focus away from the UK,” he added.
Powe looks for strong European growth companies that fall in to two camps, which he refers to as ‘established leaders’ and ‘emerging winners’ by taking a bottom-up approach to selecting companies for his fund.
“This means he is looking for businesses that have recurring revenues underpinned by pricing power, high gross margins, robust cash flow, a strong balance sheet and cash returns,” Parsons said.
“Very much in tune with a key investment discipline that Rory follows, I have once again stuck with this fund as one of my tips for 2018 – an established leader.”
Man GLG Continental European Growth has a yield of 0.57 per cent and an OCF of 0.9 per cent.