Over the past 25 years, I’ve written a weekly feature for Wealth on investment funds and trusts. Called Fund Focus, the objective is to give readers an insight into some of the funds they can use to bolster their investment portfolios.
Although I haven’t sat down and counted how many Fund Focuses I have compiled (that’s a task for retirement), I reckon it’s at least 1,000.
Of course, I cover some funds more than once. But all the Fund Focuses – this week’s is in the newspaper on page 58 – involve speaking to the manager at the helm, examining the investment record and digesting independent research published on the fund.
Sadly, not all the funds I examine go on to fulfil their potential – or live up to the spiel given to me by the manager. But many have provided handsome rewards to those who liked what they read and invested.
Yet Fund Focus is not a tipping column. Its objective has always been to give investors an insight into funds that might be on or off their radar. And I trust we achieve our mission.
A few weeks ago, I thought it might be a cathartic exercise to look back at the Fund Focuses I have written – and identify 20 funds which I think have shone the brightest. Not just in delivering satisfactory returns, but in terms of achieving results better than funds of a similar ilk.
Jeff Prestridge’s Fund Focus is not a tipping column, but gives investors an objective insight into funds that might be on or off their radar
The following 10 funds – a mix of investment funds and stock market-listed trusts – are my UK and European favourites. I will reveal the final 10 (rest of the world picks) next week. They are not recommendations, but funds which have shone for many years – and have the potential to do so for many more years yet.
If you have your own top fund list, and feel like sharing it, please send it to me at: [email protected]. Wishing you a profitable investment journey.
1. ABERFORTH SMALLER COMPANIES
Edinburgh-based Aberforth Partners is a specialist investment house which focuses on running money invested in UK smaller companies – quoted, not unquoted, businesses.
It’s a lean, mean machine built around a tight, six-strong investment team. In total, it manages assets of £1.9billion, primarily spread across two investment trusts and an investment fund.
The flagship is the £1.1billion Aberforth Smaller Companies Trust, which later this year will be 35 years old. It is invested in 79 companies, with some familiar names in its portfolio – annuity provider Just Group and food manufacturer Bakkavor.
I looked at this trust nearly ten years ago when it was riding high – five-year investor returns of 120 per cent. But the subsequent investment journey has been trickier as a result of a subdued market in UK smaller companies. Since December 2015, returns generated have totalled 60 per cent.
Yet there are few other trusts or funds I would back to extract gains from this slice of the UK stock market (the bottom 10 per cent based on the market capitalisation of companies).
Recent returns, relative to rivals, are outstanding – 94 per cent over the past five years against a peer group average of 60 per cent. The investment managers also invest heavily in the funds they run: ‘skin in the game’ is always a good signal to investors that their money will be keenly managed. In addition, the trust has delivered 14 years of annual dividend growth.
Aberforth doesn’t court publicity, preferring instead to concentrate on looking after the financial interests of their investors. Frustrating for inquisitive journalists, but as the late Alan Steel (a super financial adviser) told me ten years ago when I had failed to get an interview with Aberforth: ‘I’m happy for them [Aberforth] to remain silent as long as their performance numbers impress.’
Aberforth Smaller Companies Trust is a great way to get exposure to UK smaller companies. The trust’s annual charges total 0.78 per cent.
The 10 funds – a mix of investment funds and stock market-listed trusts – are Jeff Prestridge’s UK and European favourites
2. ARTEMIS INCOME
There are few better UK equity income funds than Artemis Income. This £4.9billion fund is 25 years old next month and its success is largely down to the enduring ability of long-standing manager Adrian Frost – aided by Nick Shenton and Andy Marsh – to identify outstanding investment opportunities.
When I interviewed Marsh and Shenton in May 2021, the fund was in recovery mode after the economic lockdown of 2020 and dividend cuts applied by most of UK plc. Since then, it has generated steady returns for its investors, knocking spots off many of its rivals: returns of 37 per cent, compared with an average 24 per cent recorded by its peer group.
Income is paid to investors twice a year and is equivalent to about 4 per cent per annum.
The portfolio has few surprises with income-friendly stocks to the fore: the likes of London Stock Exchange Group, Tesco and Imperial Brands.
The fund’s strength is its lack of surprises. It represents a Steady Eddie play on the UK stock market. Artemis is also an outstanding independent investment house where the fund managers (like Aberforth) put their money where their mouth is – investing in the funds they run.
Among its fans is scrutineer Fund Calibre. It says Artemis Income has been ‘a stalwart of the UK equity income sector for two decades and has an excellent team, a strong process and a long-term track record’. The result, it adds, is the delivery of a ‘sustainable and durable income’.
Hargreaves Lansdown also includes it on its wealth shortlist of top funds, describing it as a ‘great core to an equity income portfolio’. Annual charges total 0.8 per cent.
3. CITY OF LONDON
This £2.3billion investment trust is a dead cert for income seekers.
Run for the past 34 years by Job Curtis of investment house Janus Henderson, it invests more than 90 per cent of its assets in the UK stock market. Long-term growth in investors’ capital and income is the objective – and it delivers.
Dividends, paid quarterly, have grown annually for the past 58 years – an achievement only matched by two other funds: Bankers and Alliance Witan. In the financial year to the end of June 2024, the dividend paid to shareholders totalled 20.6p a share. To put this into context, its shares trade at around £4.70.
Given its income slant, the fund’s portfolio is not racy, but it comprises stocks you will be familiar with: the likes of HSBC, Shell, and British American Tobacco. It also has BAE Systems among its top holdings – a beneficiary of the push towards greater defence spending across Europe.
Returns since I looked at the fund in September 2019 are modest at just below 50 per cent, but this period embraces the sharp fall in stock markets as Covid forced most of the world into lockdown. Over the past five years (post the beginning of lockdown), returns are 78 per cent.
City of London’s appeal is four-fold: a Steady Eddie (we all need them in our portfolio); a fund manager who has been around the block more than once (backed by an impressive equity income team at Janus); low annual charges (0.37 per cent); and a stream of rising dividend income.
Both Fund Calibre and investing platform Interactive Investor include the FTSE250-listed fund in their respective top picks.
Fund Calibre loves its ‘conservative approach’, while Interactive describes it as a ‘compelling’ option for investors seeking a mix of income and capital growth from the UK stock market.
I love it. Rarely raved about, but the kind of fund you want at the heart of your investment portfolio.
4. FIDELITY SPECIAL VALUES
It’s been a hard gig for Fidelity’s Alex Wright since he stepped into the shoes of the great Anthony Bolton – one of the country’s best UK investment managers of all time. Yet he has done more than an adequate job.
He is manager of £1.1billion investment trust Fidelity Special Values, which he has run since 2012 – and he has done an exceptional job. He has grown the trust’s income every year since taking over while nurturing steady returns from a portfolio focused on the UK stock market. It hasn’t been plain sailing for Wright, far from it, yet he has stuck to his policy of investing in undervalued stocks in the hope that they will realise their true value in time.
When I looked at the trust in May 2021, its share price had enjoyed a strong bounce after the market carnage of 2020. Since then, it has quietly delivered returns, comfortably outperforming its UK all companies peer group. Indeed, it has posted positive returns of 32 per cent, compared with the zero-return recorded by the average of its peer group.
Both Interactive Investor and Fund Calibre include it among their top funds. Interactive describes it as a ‘strong option for investors seeking a contrarian and value orientated approach to investing across the market cap spectrum of the UK market’.
Fund Calibre says the trust should appeal to investors looking for a ‘value play in the UK market, with a medium to long-term time horizon’. Annual charges total 0.7 per cent.
5. JO HAMBRO CAPITAL MANAGEMENT UK EQUITY INCOME
Since launching 21 years ago, the £1.8billion fund has remained in the capable hands of managers Clive Beagles and James Lowen.
Between them, they bring 65 years of experience to the investment party. They know how to run a UK equity income fund.
Although the fund’s portfolio comprises the usual income-friendly UK stocks – banks such as Barclays, HSBC and Lloyds and insurers Aviva, Legal & General and Phoenix – the managers run their fund better than many rivals.
Since I took a look at the fund back in November 2022, JOHCM UK Equity Income has generated a return of 30 per cent for investors – better than the 22 per cent for the average of its peer group.
Beagles and Lowen don’t bury their heads in the sand, regularly opining on prospects for the fund, the UK stock market and equity income investing.
I get more updates on their fund than any other: the latest telling me that the fund was the 13th best performing fund in the UK equity income sector over the past year; ranked in the second decile (top 10 to 20 per cent of UK equity income funds) over both three and ten years; the first decile over five years; and the best in its sector since launch in 2004.
Beagles is a delight to interview. His enthusiasm is infectious and, for investors, reassuring. Dividends are paid quarterly and the income on offer is just short of 5 per cent a year. A class fund.
6. JPMORGAN CLAVERHOUSE
This trust should appeal to those who like a mix of long-term capital growth and a rising income from their investments.
To date, it has notched 52 consecutive years of annual dividend increases and it doesn’t seem in a hurry to end this record. In the last financial year, it paid quarterly dividends totalling 35.4p a share (34.5p in the year before) and…
Read More: I’ve examined more than 1,000 investment funds over 25 years to see which are best. Here